CBR’s hike and August CPI imply a key rate higher than 7%

RUSSIA ENERGY / FINANCE - In Brief 10 Sep 2021 by Marcel Salikhov

The CBR continued its tightening cycle and raised the key rate for the fifth time today. This time it was 25 bp, up to 6.75%, against a consensus forecast of +50 bp. While the press release about the decision was relatively dovish, CBR Governor Elvira Nabiullina indicated that the key rate might increase above 7% during the press conference, and her overall stance was more hawkish than previously. So despite a smaller hike than anticipated, CBR is leaning toward a more hawkish mood.

August CPI published this week was pretty dismal. CPI was 0.17 m-o-m, driven mainly by food prices (fruits & meat prices). Gasoline prices accelerated while there was cooling in construction material prices. We believe that inflation will accelerate, driven by seasonal factors and additional social payments in September 2021. Extra payments (~$140 to every pensioner and ~170/person to military personnel) announced by V. Putin in...

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