The CBR published yesterday the final version of the Monetary Policy Guidelines for 2020-2022, approved by the board at the last monetary policy meeting on Oct 25. There is an updated timetable for monetary policy meetings next year. Compared to the previous draft, the meetings in July and October are brought one week forward, while the core and non-core meetings are swapped. As a result, core meetings will be on Feb 7, Apr 24, Jul 24 and Oct 23, while non-core meetings will be held on Mar 20, June 19, Sept 18 and Dec 18. The distinction between the two types of meetings remains the same — core meetings will be accompanied by the announcement of a new medium-term forecast and will be followed by a press conference of the Governor. The full inflation report will be published ten days after core meetings. We expect that the CBR will stick to the practice of preferring core meetings for rate changes.
The monetary policy guidelines also provide more details about the conditions for accommodative, neutral or restrictive monetary policy stance. The CBR said that accommodative monetary policy (key rate below the equilibrium rate of 6.0-7.0%) is required when growth is below the potential level, which forces inflation below the 4% target. Conversely, monetary policy should be restrictive when the economy is overheating and there is upward pressure on inflation. A neutral stance is required when GDP growth is close to potential and inflation and inflation expectations are near the target. In our view the wording implies a higher weight on GDP growth in monetary policy decisions. The current low growth and prospects for inflation dropping below 3% in Q1’19 suggest that the CBR may potentially consider transition to an accommodative monetary policy stance in 2020.