Russian opposition activist Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
OUTLOOK 2021 Slovakia
FDI inflows to CEE down 58% in 1H20 but rebound expected
Slovakia to invest €1.2bn in digitisation
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
OUTLOOK 2021 Albania
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Storming parliaments: New Europe's greatest hits
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
OUTLOOK 2020 Bulgaria
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Socialist lawmakers in Moldova scrap settlement on $1bn bank frauds
75% of Montenegrins want EU membership
Montenegro’s new ruling coalition carves up top state jobs
OUTLOOK 2021 Montenegro
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
Romanian construction companies' activity slows in November after intense 2020
OUTLOOK 2021 Serbia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Turkcell denies any affiliation with $1.6bn loan in default extended by Ziraat Bank to Virgin Islands company
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
OUTLOOK 2021 Armenia
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Download the pdf version
The board of the Central Bank of Russia (CBR) resolved to cut the key interest rate by 25 basis points (bp) to 4.25% at the policy meeting of July 24.
The decision was unexpected – as reported by bne IntelliNews, the consensus expectation was that the CBR would make a bold cut of 50bp, after slashing the rate by 100bp at the previous meeting in the ongoing monetary easing cycle.
The expectations were underpinned by inflation trending safely below the 4% target and the post-lockdown recovery proceeding less quickly than expected, in need of additional stimulus.
Indeed, the CBR maintained the inflation guidance at 3.7%-4.2% for 2020 and 3.5%-4% for 2021, while noting that inflation could stay below 4% in 2021 due to the very gradual recovery of the Russian and global economies.
The Bank of America (BofA) believed that Nabiullina's guidance for inflation undershooting the 4% target was alone enough to further cut the interest rate by 0.5pp. However, the BofA still believed that the CBR could hold the rate at 4% or above and re-focus on inflationary risks amid an expected recovery in 2021.
Renaissance Capital also anticipated the rate would be cut by 0.5pp, while believing that CBR will sit one out at September's meeting to watch the pace of consumer demand recovery. The current easing cycle could come to an end in July, but in the case of a second wave of the coronavirus (COVID-19) pandemic, the key interest rate could be lowered again to 3.5%.
But some analysts believed that arguments for a slower rate cut of 0.25pp are stronger. VTB Capital (VTBC) argues that CBR could start moving more cautiously to avoid volatile policy corrections in the future, and give more careful and gradual signals to the monetary market.
The recent macro data is also too uncertain for a bold interest rate move, VTBC noted, reminding that while business confidence and transfer statistics improved, the industry and consumer segments were still weak in June.
Alfa Bank's Natalia Orlova also expected a 0.25pp cut, noting that some signs of recovery were coupled with a record-high plunge in disposable income in 2Q20.
"It is possible that there is more space for further monetary easing, but whether we will use it will depend on the economic situation," the Governor of the CBR Elvira Nabiullina said at a press conference on July 24 as cited by Reuters. She also said that the regulator is likely to get back to standard 25bp interest rate movements.
The CBR maintained a mild rhetoric, RenCap commented after the meeting, leaving space for another cut of 25bp later in 2020, as planned foreign currency sales towards the end of the year should support the ruble and allow for a comfortable rate cut.
Despite the mixed signals, RenCap analysts believe that CBR is becoming more optimistic about the economic recovery outlook and is likely to end the monetary easing cycle at 4% as of the end of 2020 and raise the rate back to 5.5% at the end of 2021. However, in the case of a severe second wave of the COVID-19 pandemic, the rate could be cut to 3.5%, RenCap argues.
Analysts surveyed by Reuters also believe that the CBR will end the current easing cycle at 3.75%-4% in 2020.
The CBR was also widely expected by the analysts to redefine the target neutral interest rate range (currently at 4.5% plus 2-3pp, thus at about 6-7.5%). Nabiullina confirmed that the new range is at 5-6%.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: