The ruble: Russian Central Bank continues to fight inflation

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The Central Bank continues to fight inflation. It is configured to work with it and does not intend to retreat. “Evaluation of the annual rate of underlying inflation in January 2018 fell to 5.3% from 5.4% in December 2017”, – stated in the message of the CBR. Despite a steady slowdown in underlying inflation, its current valuation is still high due to the observed relatively higher levels of inflation as well as inertia of this indicator by construction, because the targets fell below 3%. “The slowdown in underlying inflation in recent months has become to be slower.
This suggests that in the medium term the risks of deviations of annual inflation up from 4% still exceed the risks of inflation deviation down” – notes the regulator. Reducing inflation, the Russian regulator is forced to track any factors affecting its growth, and assess their impact on future performance, especially since the third quarter of this year. The indicator of underlying inflation is necessary for decision-making in the field of monetary policy, and is intended to help in identifying these factors and in forecasting its dynamics .
The current dynamics of the Russian index of underlying inflation does not give particular reason for concern, but possible troubles in the oil market and public debt continue to affect performance. A certain nervousness because of possible premature closure of the deal, OPEC forced the governments of different countries to discuss problems in personal meetings.
In OPEC countries, according to their results, I believe that it is better to have a small deficit in oil production in the market, than early to withdraw from the agreement of OPEC countries regarding production cuts. Monitoring Committee on implementation of transactions on the restriction of the production of OPEC and non-OPEC in April, will assess the level of oil reserves in OECD countries. After the monitoring Committee will perform its work on the assessment of the level of world reserves, will begin the discussion of the mechanism out of the current agreement OPEC+. However, this process will depend on US and their willingness to support their oil.
The same effect on us, but on the external debt of the country, and has a statement on Wednesday, the US Treasury Secretary about the imminent tightening of sanctions against capital of Russia’s citizens and our business partners. The return of capital back continues to increase liquidity in the country may be badly received by the Central Bank, particularly in the context of the fight against inflation, therefore totals by year can go beyond the corridor of 4% and closer to 5% annual inflation. If the banking sector and will withstand this year, the efficiency of the industry will depend for the most part from the state.
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Alexander Grigorenko,
Asset Manager
IR Global Capital