MNI CBRT Review - January 2024: Terminal Rate Reached

Executive Summary:

• The CBRT delivered a 250bp rate hike, taking the one-week repo rate to 45%.
• The central bank stated that the level of monetary tightness is now at an appropriate level to establish the disinflation process.
• Nevertheless, the Bank remains aware of inflationary risks and therefore maintains that rates are likely to remain at their current levels for some time.

See our full review, with a summary of sell-side analyst views, here:

MNICBRTRevJan24.pdf

The CBRT delivered a 250bp increase to the one-week repo rate, in-line with unanimous sell-side consensus, taking the one-week repo rate to what is an expected terminal rate of 45%. The central bank stated that monetary policy is now tight enough to establish disinflation (suggesting no further rate hikes are forthcoming) but have left the door open to reassess should inflationary threats re-emerge, adding that rates will be maintained at their current levels for some time.

The statement did not explicitly declare the January hike as the last of its cycle, with attentiveness to reinflationary risks providing a somewhat hawkish tilt to the policy statement. This was largely as expected, however, with the majority of analyst views we had previewed prior to the decision expecting the central bank to maintain a hawkish bias. Risks threatening an inflation resurge include potential fiscal loosening ahead of the March local elections as well as the minimum wage hike for 2024 (which was delivered toward the higher end of expectations).