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Sberbank analysts expect the next tightening from the Bank of Russia in a month and a half

Key rate dynamics, data from Bloomberg

The Bank of Russia on Friday, April 23, raised its key rate by 50 bp. up to 5%, indicating the likelihood of its further rise this year to almost the upper border of the neutral range amid persistently high inflation and economic recovery.

“The rapid recovery in demand and heightened inflationary pressures make it necessary to return to a neutral monetary policy earlier,” the regulator’s website said in a statement. – The Bank of Russia will assess the feasibility of further increasing the key rate at the next meetings.

Most economists surveyed by Bloomberg were expecting a 25 bp rate hike. Elvira Nabiullina explained the rate increase with a big step than usual, the need to act proactively, so that in the future it would not be necessary to raise the cost of borrowing even higher and move to a tough monetary policy.

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The Bank of Russia is likely to raise the key rate and following the results of the next meeting on June 11 of this year, analysts commented on the decision of the regulator Sber CIB in hot pursuit. They noted that the Central Bank’s communiqué contained a phrase that it would assess the feasibility of a further increase in the key rate at the next meetings. Usually, this wording indicates a high probability of a rate hike at the next meeting, experts from Sber CIB noted. According to their forecasts, by the end of this year the key rate will reach 5.5%.

The Central Bank published its estimate of the key rate for the first time today. The key rate trajectory assumes that the cost of borrowing will on average be in the range of 5.3–6.3% in 2022, and in the range of 5–6% in 2023.

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