On Friday, the CBR left the key rate unchanged at 5.50%, altered the entire refinancing toolset and equalised the 1w repo and depo (at 5.5%) auctions, explicitly naming it the key rate and the centre of the policy rates corridor. The floor of the policy rates corridor is the stand-by deposit facility at 4.5%; however, we believe that 1w deposit auctions at 5.5% are likely to ensure that cash rates only temporarily fall that low. The ceiling remains the same (the 1d stand-by facilities) but was further hardened by expanding the collateral pool to include loans (further to repoable bonds/shares and FX). The regular 1-6d repo is to be cancelled next year and used only as ‘fine-tuning’.
Taken together, the less dovish rhetoric and the re-inclusion of the phrase, “the appropriate rate level near term”, implies a much reduced chance of a rate cut in October, in our view. Nevertheless, the recent shift in the CBR board, the official announcement that tariffs are not to be increased next year and the slowdown in headline CPI to below 6.0% would remove the justification for the CBR’s hold fast (hawkish) stance. In this regard, we expect a 50bp cut in rates in 4Q13, without which we would expect downside risks for both inflation and growth in 2014.
VTB Capital analyst
Back to the list