Russia: CBR to keep its Key Rate on hold at 7.25% - TDS

In line with the almost unanimous consensus, analysts at TD Securities expect the CBR to keep its Key Rate on hold at 7.25% at today's Board meeting.

Key Quotes

“Since the last Board meeting on 27 July the inflationary outlook has clearly worsened. The ruble has depreciated by about 8% against the US dollar, and August headline CPI inflation jumped to 3.1% Y/Y from a prior 2.5%, although most of the move higher was due to food prices - core inflation was running at 2.6% Y/Y in August and so comfortably below the 4.0% target.”

“But consumer inflation expectations remain high, at 9.9% in August, boosted in recent months by ruble weakness combined with the announcement of VAT hikes at the start of next year.”

“On 4 September CBR Governor Nabiullina said that "there were factors in favor of raising interest rates at a meeting next week, even though most evidence still pointed toward leaving borrowing costs unchanged".”

“We think that the CBR will want to await further developments, with the focus on future ruble movements, domestic inflation readings, and inflation expectations. The press statement will adopt a hawkish stance.”