Research Briefing | Oct 28, 2021

Russia | CBR views new lockdown as inflationary and hikes 75bp

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The CBR today surprised the market and us with a 75bp hike, which brought the policy rate to 7.50%. The CBR language has remained hawkish, suggesting that another hike may be on the cards in December.What you will learn:

  • Furthermore, the CBR has raised its forecast for its average policy rate in 2022 to 7.3-8.3% from 6.0-7.0% in July.
  • We see it as a signal that it could potentially continue tightening into 2022 if inflation expectations keep deteriorating.
  • The CBR’s hawkish stance supports our heavy RUB OW. With USDRUB briefly testing the psychological level of 70 today, we expect further appreciation in the coming weeks, supported by the strong fundamentals and attractive carry.
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