Russia’s inflation breaches 6% target, banks prepare for next interest rate hike
Annual inflation in Russia reached 6.3% as of October 9, accelerating further from 6% seen in September, according to the latest data by the Central Bank of Russia (CBR). Separate estimates by the Ministry of Economic Development showed that based on weekly data, annual inflation accelerated to 6.38% as of October 16.
Annual inflation has thus effectively breached the 6%-7% full-year inflation guidance previously provided by the CBR in September. (chart)
To remind, the Central Bank of Russia (CBR) has recently reiterated a hawkish stance and said that it will be necessary to maintain a stringent monetary policy in 2024.
"The return of inflation to target under stimulative fiscal policy in 2024 may require additional tightening of monetary policy," the central bank analysts commented, as cited by Reuters. The previous key rate hikes have not yet translated into a notable slowdown in inflation, they added.
In the meantime, a separate report by RBC business portal showed that in mid-October the Russian banks sharply increased their borrowings from the CBR, with the liabilities to the regulator peaking at RUB7.14 trillion on October 13.
The banking sector is now effectively in a mode of structural liquidity deficit, with the banking debt to the CBR exceeding the amount of funds placed in deposits and correspondent accounts with the CBR. As of October 13 the deficit exceeded RUB6 trillion, falling back to RUB1.19 trillion by October 17. The analysts surveyed by RBC believe that the banks are building up liquidity at cheaper rates expecting further key rate hikes on October 27.
Russian service providers recorded a modest expansion in business activity during November, according to the latest PMI survey from S&P Global, but the rate of growth slowed somewhat from October.
Largest number of jobs created in construction, IT&C and hospitality sectors.
Czechia remains the only EU country not to have recovered its pre-pandemic level of output.
Independent group ENAG calculates 129% y/y.
Hungary’s economy grew 0.9% quarter-on-quarter in the third quarter, after four consecutive months of contraction.
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