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Key event is CBR’s policy meeting on Thursday

This week's macro releases include the external trade balance for July, published by the CBR, the federal budget balance in January-August, as well as the weekly CPI. However, heading the list is the CBR’s policy meeting, scheduled for 13 September.

This week, all eyes will be on the regulator’s key rates decision, with arguments for both a ‘hike’ and ‘no change’. The former include i) headline and core CPI exceeding and matching, respectively, the upper bound of the CBR’s FY12 forecast (and both stand well above next year’s target); and ii) the labour market is tight, with wages increasing strongly. Also, in its August statement, the bank removed the “rates are appropriate” phrase. In favour of ‘no change’, we note the i) slower growth of the economy; ii) cooling lending; iii) negative prospects for growth in the coming quarters (see our Thoughts of an Economist, of 6 September); iv) fact that the increase in the CPI can partly be attributed to a rise in food prices due to supply shock; v) higher cost of funds provided by regulators to banks, which might be treated as ‘silent’ monetary policy tightening; and vi) a combination of tighter fiscal policy and recent RUB strength (might be considered to be enough in the current environment). Hence, we prefer to wait for the lending data (early this week) before keeping our 25bp rate hike call or adjusting it for ‘no change’.

Among the other important things to watch this week.

Data on the external trade balance in July is to be weaker than in June due to stronger imports, despite higher oil prices. Customs data implies that the trade balance for July might be below USD 12.0bn.

In the report on fiscal statistics for August, we might see signs of slower growth in budget outlays (towards 0-3% YoY in the last 5 months of the year, after 26% YoY in 7mo12).

We expect the weekly CPI (Wednesday) to point to an acceleration in headline YoY growth, with it reaching 6.2%. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CBR, CPI, ruble, dollar, oil

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