The key event is the CBR’s first MTRO auction today, with a maximum allotment of RUB 500bn. At its last policy meeting, the CBR introduced a new 12-month floating rate facility based on 312-P regulation (allows banks to use nonmarket collateral such as loans to corporates). The interest rate is linked to the 1-week auction repo rate (central policy rate), with a minimum premium of 25bp. The minimum rate might reach 5.75%, but as we expect demand to exceed the CBR's offer, we see the final rate within the 6.00-6.25% range. The regulator is trying to resolve two problems: i) the shortage of collateral for the standard repo facility, by shifting the refinancing structure towards 312-P; and ii) the improper functioning of the monetary policy transmission mechanism, by anchoring the 12M market rate to the central policy rate. We do not see the new facility as a QE-like policy, since there is unlikely to be an increase in the CBR's balance sheet; following the auction, banks are likely to bid less at the regular 1-week repo auction on Tuesday. Concerning the effect on the real economy, we expect the new facility to bring deposit and lending rates 100bp lower within the next few months.
The CNB is to hold its regular MPC meeting on Thursday. Base rates are already at the zero boundary and we expect them to stay at 0.05%. The key question now is will the CNB go for the next step (and, if so, when): FX interventions to weaken the currency. Despite the weak recovery and core inflation below 0, we expect the CNB to wait at least until the autumn before shifting towards a new wave of monetary policy easing with outright buying of foreign currency.
The weekly CPI data in Russia is likely to show the disinflation trend continuing at the headline level (we expect headline CPI to dip to 6.3-6.4% in July from 6.9% in June).