The Central Bank of Russia (CBR) is expected to hold its first monetary policy meeting for 2017 on Friday, February 3. The central bank is widely expected to maintain its interest rate at 10 percent as the country’s inflation remained a bigger concern for the Russian economy than U.S. President Donald Trump’s trade protectionism.
The central bank Governor Ksenia Yudaeva said in her latest speech that the Russia's macroeconomic policy has been more stable and stronger after Brexit vote and Donald Trump’s victory in the U.S. Presidential election in 2016. This is also been reflected in the government budget and CBR monetary policy decisions. Lastly, she also labelled inflation as the biggest risk to economic growth, rather than the prospect of stick sanctions from the United States.
In terms of latest important economic data, Russia's inflation fell to 5.4 percent in 2016 (lowest since the Soviet Union fallout). The decline in inflation numbers was majorly driven by the recent appreciation in Rubble with recovery in energy prices as well as improved buying for Russian government bonds.
On the other hand, the Russian economy ministry noted in its weekly report that the country's annual inflation is expected to hover between 5-5.2 percent in January, 2017. Also, the ministry added that consumer inflation is set to grow 0.6-0.8 percent m/m in the first month of January, eroding further chances for a rate cut from the central bank.
Following moderately tight monetary policy, the regulator foresees that the country’s annual consumer inflation is highly likely to decline below 4.5 percent by October, 2017, reaching near to the CBR target of 4 percent.
Lastly, we at FxWirePro expect that the Bank of Russia will assess recent inflation risks and compliance of economic performance when it makes its key rate decision in the next week.