Analysts at MUFG Bank expect the Central Bank of Russian (CBR) to raise interest rates this week by 25 basis points to 5.50% to tame inflation. They see more rate hikes during the second half of 2021.
Key Quotes:
“The Central Bank of Russia (CBR) will meet on 11 June, and we (and consensus) expect to the Monetary Policy Committee (MPC) to raise rates by 25bp to 5.50%. The CBR surprised markets in the April meeting by hiking by a more than anticipated 50bp, citing the strength of the economy which has been generating demand-driven inflationary pressure.”
“Governor Nabiullina declared that the larger than normally preferred 25bp could be possible in future meetings should data warrant such action. She also accentuated that the CBR’s strategy is tilted more towards front-loaded hikes to limit the terminal rate of the cycle. With this backdrop in mind, the economic data has robust since the CBR’s last meeting, with Q1 GDP surprising on the upside and weekly inflation readings have been demonstrating stronger prints.”
“We view that this is consistent with the CBR’s perceptions that the economy is growing fast and inflationary pressures are present. As such, we view that a 25bp hike is warranted this week, taking the key policy rate to 5.50%, with risks skewed for a 50bp hike.”