CBR cut key rate by 100 b.p. as expected; 1Q15 GDP revised down to -2.2% y-o-y

RUSSIA ENERGY / FINANCE - In Brief 15 Jun 2015 by Marcel Salikhov

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CBR’s Board of Directors decided today to cut key rate by 100 b.p., from 12.5% to 11.5%. The move was largely expected by market consensus and was no surprise. The marked was was surprised by the statement that “potential of further monetary easing is limited by current inflation risks”. It is currently perceived that at the next meeting (July, 31st) monetary authorities may abstain from cut. Currently CBR expects GDP do decline 3.2% in 2015 compared to the last MED forecast of -2.8%. But CBR is more pessimistic about 2016 and expects the economy to grow 1.2% with $70 oil and to decline 1.2% with $60 per barrel. MED to the to the opposite expects GDP to grow 2.3% in 2016 even with $60/barrel oil. Last news from Rosstat give rather dim outlook. According to the second estimate of 1Q2015, the economy declined 2.2% y-o-y (-1.9% according to the first estimate). So At saar terms Russian GDP declined 5% in 1Q2015. Revised data shows that growing optimism in official circles is too early and the economy has not yet bottomed out. By production approach decline is caused mainly by wholesale and retail trade (-7.6% y-o-y) and financial intermediation (-4.1%) dynamics. On the positive side mining surged 4.9% y-o-y supported by RUB devaluation.