Sergey Drobyshevsky on key rate expectations at the Central Bank meeting in April

"I believe that at the meeting on April 25, the Bank of Russia will choose between two options: keeping the current rate or starting a cycle of its gradual reduction. External factors, in my opinion, cannot yet have a strong impact on the economic situation in the Russian Federation, in particular, on the degree of macroeconomic uncertainty or risks, budget revenues, exchange rate and inflation, therefore, the Bank of Russia, taking them into account, will definitely rely primarily on information about dynamics of inflation, inflation expectations and domestic monetary aggregates. Currently, according to our estimates, Russia is experiencing a local peak in consumer inflation, and results of the two recent weeks before the decision-making are very important for the CBR: during the week from April 7 to April 13 inflation was lower than a week earlier, and we will see the CPI data on April 23 for the week from April 14 to April 20. If inflation declines further or at least stabilizes at a lower level, I believe there is a very strong chance that key rate will start lowering to my forecast of 20.5%. It is not so much the scale of the rate cut that is of fundamental importance, but rather the fact that this process has started and that it is a signal to all market actors that the Bank of Russia is assessing the situation, that inflation has been brought under control, and that it is expected to decline in the future, followed by a reduction in the key rate. According to our estimates, under favorable developments, the CPI growth will be 5.2–6.0% by the end of the year and the key rate may fall to 14.5%.

In terms of medium-term inflation forecast, the CBR, I believe, may be even more conservative than in terms of decision-making on the key rate, and therefore, I would not rule out some delay in revising the forecast range of values until the next meeting in June," — said the expert.