Evgeniy Goryunov, Head of Monetary Policy Department at the Gaidar Institute, commented to RBC that the VAT growth could result in the increase of inflation expectations and thereby to impact on the speed of reduction of the Central Bank's key rate.
"In addition to immediate increasing inflation, the VAT growth will also help to growing inflation expectations, and this could also be an argument for suspending the rate cut or doing it more slowly than planned," the expert emphasized.
He believes that the VAT increase will not be a key factor at the next Central Bank meeting, which will mostly focus on the exchange rate, price dynamics, and employment. However, in the long term, he believes that the VAT increase will contribute to a reduction in the budget deficit responsible for disinflationary factor.
Evgeniy Goryunov also recalled the regulator's stated position, when a more moderate rate cut is due to the weakening ruble and lower prices for export goods. "Moreover, the Central Bank clearly stated that its decision is based on the desired budget parameters announced by the Ministry of Finance and will adjust monetary policy if the Ministry of Finance deviates from its plans," the expert concluded.