The key rate cut to 17%

RUSSIA ECONOMICS - In Brief 08 Apr 2022 by Alexander Kudrin
The CBR cut its key rate to 17% while referring to slowing w-o-w inflation, and the risk of further deterioration of the economic activity pressure on the financial sector as well. The regulator also hinted that further rate cuts are possible but the decisions will be data-dependent. High key rate and capital control combined with restricted exports to Russia helped the ruble to appreciate below R/$80, but the situation generally remains quite uncertain, as Russia’s exports may start shrinking faster going forward. On top of that appreciated ruble combined with accelerated inflation could result in its appreciation in real terms, which would be undesirable for the country’s tradable sector, manufacturing in particular. Some “unfriendly” countries already imposed high import tariffs on Russian non-sanctioned goods, while Russia might be selling products to “friendly” and “neutral” countries with some discounts. Therefore a weaker ruble would be desirable, and apart from lowering the key rate, the CBR may start easing capital controls more actively.Evgeny GavrilenkovAlexander Kudrin

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