As universally expected, the CBRT kept its key policy rate unchanged at 14.0% and did not feel the need to make any meaningful change in the language used in the interest rate announcement note. This has been the case despite the significant change in the global economic outlook and the sharp rise in price pressures at home in recent months, making the MPC decision less and less market relevant.
The decision and the announcement note once again confirmed that the CBRT had no intention of tightening the policy in an orthodox way and would instead go on with the macroprudential measures whose effectiveness in fighting inflation is, in our view, dubious. In the main policy guidance sentence of the note, the MPC has stated that it will “continue to implement the strengthened macroprudential policy set decisively and take additional measures when needed”.
We see the CBRT remaining on hold and doing more of what has already been delivered in terms of macroprudential measures in the coming months.
Given the consistent increase in inflation and the worsening in inflation expectations, the policy rate in real terms has become even more deeply negative. Despite this, the language used in the interest rate announcement note shows no change in the dovish policy stance of the CBRT. The only meaningful change this month was the reference to increased global recessionary risks. As has been the case in recent months, the CBRT has put all the blame of higher inflation on supply side global factors (geopolitical developments, higher energy prices, etc.) and has made no reference to demand-led pressures and policy credibility. The CBRT remains optimistic about the disinflation path, stating that regional de-escalation, along with the measures already taken and “decisively implemented” to fight inflation (not elaborating on what exactly these measures were), will start a disinflation process.
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