The CBR keeps the key rate unchanged

RUSSIA ECONOMICS - In Brief 28 Oct 2022 by Alexander Kudrin
The Central bank decided to keep the key rate at 7.5% but acknowledged that inflationary pressure remains low. In reality, Russia had m-o-m deflation for three consecutive months in the summer. In September, deflation ended, and CPI grew by 0.05% m-o-m. Inflation y-o-y fell to 13.7%. Rosstat reported a couple of days ago that inflation in seven days ending on October 24 was at 0.08% w-o-w, and the MTD inflation reached 0.16%. In October, inflation will likely stay at 0.25% m-o-m, implying that the y-o-y inflation will fall to 12.7%. Indeed, inflationary pressure doesn’t look high in Russia. The CBR explained its cautiousness to keep the key rate unchanged by the complicated geopolitical situation, partial mobilization, and the uneasy situation in the global economy. The regulator also mentioned that the Russian economy in 3Q22 performed better than was anticipated, adding that adjustment to the new geopolitical and economic realities was successful. Hence, no need for further stimulus amid medium-term risks. Meanwhile, the CBR also reported that lending activity picked up in September, and the number of mortgages granted to households in September (around 137K), reached the same monthly level as in the early year on average. In May, the number of new mortgages fell to 37K, then it started to grow and in the following months reached 66K (June), 92K (July), and 122K (August). In September, total outstanding mortgages grew by 2.3% m-o-m, which could be a sign of overheating in this segment of the consumer lending market. It can also justify the CBR’s cautious decision today. Evgeny Gavrilenkov Alexander Kudrin

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