CBR to cut the key aggressively as the ruble looks too strong and inflation slows

RUSSIA ECONOMICS - In Brief 25 May 2022 by Alexander Kudrin
Rosstat reported deflation of 0.02% in seven days ending on May 20 so that the MTD inflation reached 0.13% only and turned well below all expectations. The YTD inflation reached 11.82% on the same date. The CBT reported that interest rates on short-term consumer loans (up to 1Y maturity) jumped to 24.32% in March, while interest rates on consumer loans with maturity from 1Y to 3Y rose to 19.64%. Interest rates on loans with over 3Y maturity remained at around 11%. Interest rates on car loans of all types were well above 20% in March. Meanwhile, the ruble appreciated to abnormally strong levels on the back of a strong current account, capital controls, and a lack of intentions to keep money offshore amid risks of new sanctions. Elevated interest rates and a too strong ruble can seriously damage the economy. Therefore, the CBR decided to hold a BoD meeting well ahead of schedule. The regulator may cut the key rate abruptly tomorrow – at least 200, but 300 or even more won’t surprise. Evgeny Gavrilenkov Alexander Kudrin

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