The Bank of Russia, which on Friday raised its key rate immediately by 50 bp to 5.0% per annum (Bloomberg experts expected an increase by only 25 points on average), will raise the rate by another 25 bp. at a meeting in June, after which it will take a pause to assess trends in food inflation in the summer months, analysts at Alfa-Bank predict, according to chief economist Natalia Orlova.
Towards the end of the year, however, the risks of the beginning of the Fed’s tightening of policy are growing, which will lead to a surge in inflationary risks in emerging markets and force the CBR to act. The rate is projected at 5.5% by the end of 2021.
The trajectory of the Central Bank rate “indicates the likelihood of entering the phase of tight monetary policy in 2022, which is a very strong signal that has not yet been taken into account by the market.” Alfa-Bank now expects the rate at the peak of tightening in 2022 at 7%, previously predicted 6%.