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Today the Bank of Russia will raise its key rate, but how much?

Dynamics of consumer inflation in the RF (in% YoY, white) and the key rate of the Central Bank of Russia (blue). Source: Bloomberg

28 out of 41 analysts surveyed by Bloomberg forecast a 0.25% rate hike and 13 forecast a 0.50% rate hike. The derivatives market is pricing a 0.84% ​​increase in the CBR’s key rate over the next three months.

In addition, today the regulator is to publish updated economic forecasts and, for the first time in history, publish the forecast trajectory of the key rate (analogue of the Fed’s “dot plot” – approx.

The Bank of Russia began tightening monetary policy earlier than most economists expected. The regulator notes the deterioration of inflation forecasts amid a faster-than-expected recovery in consumer demand. And an increase in government spending is likely to only strengthen this trend.

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New US sanctions on the Russian national debt and tensions on the border with Ukraine put ruble fourth in the list of worst emerging currencies. Despite the March rate hike, since then the Russian currency has depreciated against the American one.

“The Bank of Russia has a wide range of reasons for further tightening monetary policy,” said Scott Johnson, an economist at Bloomberg. “(On Friday) there might be a big hike in rates, but we suspect the regulator would prefer to keep the powder dry and raise it by 0.25%. At the same time, his rhetoric regarding further steps will become tougher. “

Economists do not expect a sharp slowdown in inflation in the Russian Federation, which in March reached a record level over the past four years or more. The Ministry of Economic Development raised the forecast for consumer inflation in the country at the end of the year from 3.7% to 4.3%.

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SberCIB analysts see a high probability of a 0.50% increase in the key rate at today’s meeting. This is what they are told by the weekly inflation data for April.

In addition, in June, the key rate, according to their forecast, may be increased by another 0.50%.

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