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Shuvalov says that CBR should opt for rate cut


Yesterday, Bloomberg printed an interview with First Deputy Prime Minister Igor Shuvalov concerning monetary policy and other issues. The key takeaways are as follows:

  • In order to stimulate growth, the CBR should opt for a cut in base rates of up to 100bp.
  • Low and stable inflation is a key priority for the government.
  • Shuvalov said that current CBR Chairman Sergey Ignatiev had performed monetary policy independently, based on the Central Bank law and its core goals of an efficient interest rate policy and stable inflation.
  • Russia needs to transform its export structure towards a more diversified one.
  • Russia needs to reduce corruption as quickly as possible.
  • Privatisation should be transparent and appealing to all possible investors.
  • Russia is not ready to write off Cyprus’s EUR 2.5bn debt. 

Shuvalov’s comments on monetary policy are eye-catching, especially given that President Vladimir Putin has to announce Ignatiev’s successor by 24 March 2013. We broadly agree with the call for easier monetary policy, but anticipate a cut of just 75bp later this year.

In our view, one of the major risks for inflation in the medium term is monetary policy being too loose. Shuvalov’s other comments are in line with the recent rhetoric from top officials and so are positive to neutral from the market perspective. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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