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CBR keeps rates on hold


At its monthly monetary policy meeting on Monday, the CBR decided to keep its key interest rates unchanged (in line with our and consensus expectations). The deposit rate remains at 4.00%, the 1 day fixed repo rate at 6.25% and the refinancing rate at 8.00%.

At the same time, the CBR reshuffled its absorbing toolkit by introducing 1-week deposit auctions and (the halted) 1-week and spot-week standby deposit facilities. Hence, the CBR is to extend O/N deposits at a fixed rate (4.00%), as well as 1-week and 1-month deposits via auctions (with the maximum rates at 4.75% and 5.50%, respectively).

The CBR failed to deliver on its promise to resume using blue-chip equities as collateral for REPO. The next policy meeting is scheduled for early May.

In separate news, due to the launch of the 1-week deposit auction, as of 17 April the CBR is to choose between REPO and DEPO auctions (depending on liquidity conditions) and to announce on Monday what type of 1-week auction will be placed on Tuesday. 

Although the maximum rate for the existing 1-month deposit auction has been at 5.50% this year, its de facto rate (formed during auctions) has remained at 4.05% YTD. Hence, we see the upper limit for the 1-week auction deposit rate as largely irrelevant.

The CBR’s press release reiterates concerns about inflation risks, although it differs from previous statements. The authorities are uncertain how significant an effect there will be from increasing tariffs on food prices (scheduled for 1 July). We share this cautious approach and forecast end-2012 CPI at 7.0% YoY (vs. 3.7% YoY in March).

The CBR thinks the economic performance in February has improved, with a jump in IP, high investment growth, robust real wages and low unemployment. We concur with the monetary authorities and see economic growth gathering momentum.

We also expect the CBR to deliver on its promise to add blue-chip equities into the REPO list at the May board meeting, and explain this delay due to technical issues. 

Alexey Moiseev, Aleksandra Evtifyeva, Dmitri Fedotkin
VTB Capital analyst

CBR, inflation

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