Nor does the CBR sees a high risk of a significant decline in export earnings and growth in import payments relative to the situation in March, analysts at the sanctioned state-controlled Otkritie believe, expecting the central bank to cut the key rate further to 14-15% at the upcoming policy meetings. The CBR's "signal suggests above all that, based on the information available to the regulator, it does not expect a significant surge of volatility in the financial market soon – neither because of a possible "technical" default," Otkritie Bank commented on April 8, referring to the Finance Ministry's decision to opt for confrontation amid sanctioned forex/gold reserves and pay sovereign coupons in rubles. Notably, the CBR allowed for possible further cutting of the key interest rate, with the next policy meeting now scheduled for April 29. The monetary tightening that has occurred is partly offset by the lending support programmes of the government and the Bank of Russia, but will generally continue to limit pro-inflationary risks,” the CBR wrote in the press release.
“Annual inflation will continue to rise due to base effects, but the latest weekly data indicates a significant slowdown in the current rate of price growth, also due to the exchange rate movements of the ruble. Indeed, the CBR attributed the surprise cut in the key interest rate to financial stability risks that “stopped rising” due to the capital control measures adopted. Inflation on the reporting week also showed signs of slowing down, with weekly inflation going below 1% week on week for the first time since the invasion. This helped soft-land the ruble exchange rate from over RUB140 to the US dollar to below RUB75 as of April 7, back at the pre-invasion levels. Nabiullina was re-appointed for her third five-year term, maintained the rate at 20% and introduced strict capital controls, limitations of capital outflows, and mandatory sales of 80% forex revenues for commodity exporters.
On the outside, a stable ruble rate helps project invincibility amid Western sanctions.Īs closely followed by bne IntelliNews, as the Russian financial system was shocked by the post-invasion fall-out the CBR made an emergency rate hike to 20% and President Vladimir Putin reportedly had to personally keep CBR Governor Elvira Nabiullina from resigning. The ruble is trading at pre-invasion levels, which is of extreme importance, as the ruble to the US dollar remains the most closely watched economic indicator by ordinary Russians at home. The Central Bank of Russia (CBR) made a surprise key interest rate cut from 20% to 17% on April 8, although the policy board meeting was not scheduled until April 29, as the regulator soft-landed the Russian ruble to the levels at which it traded before the military invasion of Ukraine.
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