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CBR's Ulyukaev comments on Guidance on Monetary Policy for 2013-15


Yesterday, First Deputy Chairman of the CBR Alexey Ulyukaev commented on the Guidance on Monetary Policy for 2013-15 submitted to the State Duma. The key takeaways are as follows.

The forecast for this year’s headline CPI was increased to near 6.4% YoY and for next year to 5.0-6.0% YoY (from 6.0% and 4.5-5.5% YoY, respectively). The forecast for 2014-2015 was set at 4.0-5.0% YoY.

The trade balance surplus is to rise to USD 190bn with CA to hit USD 80bn this year.

Capital outflows are to reach USD 60-65bn this year, USD 10bn next year and then switch to capital inflows by 2015.

Inflation targeting is to be implemented from 2015; this is likely to be accompanied by a fully floating regime on the FX market. 

Even the CBR’s upwardly revised forecast is too low, as September's headline CPI is likely to reach 6.6% YoY and the eop-year reading is expected at 7.3% YoY. Thus, a further acceleration in both the headline and Rosstat’s core inflation in the coming weeks might trigger another 25bp rate hike in 4Q12. Given the new 2013 forecast for CPI, we are comfortable with our forecast of 100bp rate cuts next year. The forecasted inflation range for 2014-15 gives a hint as to where the inflation target could be set afterwards: we continue to expect the central level of the target to be set at 4.0% or 4.5%.

While the CBR’s CA estimate points to a USD 20bn surplus during 2H12, we see a lower figure with CA coming below the zero mark in December (based on Brent at USD 95/bbl).

The CBR's estimate of capital outflow is broadly in line with our forecast and mirrors the current account dynamics that we expect.

Inflation targeting has long been on the Russian regulator’s list. Currently, the CBR is close to implementing this policy, as the FX market regime is near the free float, while interest rate volatility has become significantly lower in recent years. Thus, there is no surprise in this decision, although we now have a new expected date for the official implementation of this policy. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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