Russia: Central bank to hike by 25bp to 4.75% with a published new rate trajectory – MUFG
On Friday, the Central Bank of Russia (CBR) will have its monetary policy meeting. Analysts at MUFG Banks believe it will raise the key rate by 25bp to 4.75%. They point out the new trajectory of the rate policy will be key.
Key Quotes:
“We (and consensus) believe that it will raise rates by 25bp to 4.75%, with upside risks of 50bp firmly on the table. In its March meeting, the CBR hiked rates by 25bp and signalled that the increase was a first step towards normalising rates in the medium term.”
“The medium-term macroeconomic forecasts will be updated and here we look for any revisions to the 3.7-4.2% year-end inflation forecasts. Moreover, and in a first, the CBR will publish its trajectory of the policy rate. According to Governor Nabiullina’s rhetoric, this rate path will neither be a dot plot akin to the FOMC’s forecasts, nor will it be a pure model outlook analogous of the SARB’s.”
“Our base case is that the CBR’s reaction function to higher inflation as well as a weaker external environment will mean a continuation of rate hikes at each meeting by 25bp for the next three meetings to 5.25% by July 2021 and thereafter pause as inflation begins to recede.”
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
