As universally expected, CBRT kept its policy rate at 6.25% in today’s meeting. Required reserve ratios (RRR) were also left unchanged. Market expectations were mixed, with some analysts, including ourselves, expecting another small upwards adjustment.
The statement raises a warning flag on inflation, but MPC is confident with its policy. While RRR hikes raise loan and secondary market rates, this effect is dampened by a strong financial system in an open economy. We continue to advocate for conventional monetary-fiscal tightening to slow down domestic demand and arrest the widening in the current account deficit.
Click here to read the full report:
http://www.easyforexnews.net/uploads/2011/05/299297.pdf
HSBC Global Research