Yesterday, the CBR left all key interest rates unchanged: the central policy rate remained at 5.50% and the unified required reserve ratio was set at 4.25% by lifting it on residents’ liabilities from 4.00% and decreasing the ratio on non-residents’ liabilities from 5.50%.
Following the recent sharp increase in headline CPI, the CBR left its rhetoric on economic growth mostly neutral and peppered the statement with cautious remarks on inflation in order to contain inflation expectations and prevent a possible harmful pass-through effect on the real economy. Meanwhile, altering the required reserve requirements is mostly neutral for liquidity and implies that the regulator is becoming more tolerant towards foreign currency inflows, as originally higher RRR for non-residents was set to limit these inflows. Hence, as the overall tone has become a bit less dovish, we do not think the CBR will start the easing cycle in March. However, we still expect the first easing step in April, as the headline CPI is set to make a first downward move in March, while the economic picture is unlikely to improve in the near term, in our view. Uncertainty over who will be nominated for the next CBR chairman is an added risk to our forecast.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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