Yesterday morning, the future CBR chairman, Elvira Nabiullina said “Russia’s economy growth is running below its potential and that a 3-4%-annual growth pace is affordable even under the current institution framework”.
This is the first time in recent times that a CBR representative (albeit a future one) has explicitly stated that Russia is facing weaker than potential growth rates this year. This comment came immediately after the Ministry of Economy downwardly revised its growth forecast, which pushed expectations of full-year growth from 3.6% to 2.4%. Nabiullina’s observations coincide well with recent comments from various experts that are associated with Nabiullina and who were advocating monetary policy easing. In particular, Ksenia Yudaeva, Chief of the Presidential Experts' Directorate, declared that the economy has been significantly losing momentum and some monetary easing is possible. Andrey Klepach, Deputy Minister for the Economy, has been a long-time advocate of easier monetary policy.
Also, Herman Gref, CEO and Chairman of the Management Board of Sberbank, yesterday said that an inflation slowdown was obvious and that the CBR might reduce rates before Nabiullina takes charge of the regulator. Hence, we see all of the abovementioned remarks as supportive for our out-of-consensus call for a 25bp cut of all key rates at May’s monetary policy meeting.
Maxim Oreshkin, Daria Isakova
VTB Capital analyst
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