CBR underestimates exchange rate's impact on inflation - VTB

MOSCOW. Nov 28 (Interfax) - The weakening of the ruble is more pro-inflationary than the Central Bank of Russia (CBR) believes and this factor could have an impact on the future trajectory of the key interest rate, the first deputy CEO of state bank VTB , Dmitry Pyanov said.

"We believe that the Central Bank underestimates the transfer effect," Pyanov told reporters.

He said the CBR estimates that the ruble's depreciation by 10% adds 0.5-0.6 percentage points to the inflation rate. "Our model - with a 25% share of consumer imports in the basket - shows that the transfer effect is five times stronger than the CBR's," Pyanov said.

"We are now seeing a very important development that could, essentially, lead to the revision of forecasts for the future movement of the key rate, because this is a strong inflationary factor that we're now seeing," Pyanov said.

The exchange rate has been affected by U.S. sanctions against Gazprombank , which since 2022 has been the authorized bank through which foreign buyers opened ruble accounts to pay for Russian gas, he said.

The channel for the flow of forex from export revenues to Russia is not working right now for some reason, Pyanov said. Exporters usually sell forex at this time to pay taxes, which has a favourable impact on the ruble's exchange rate, but this effect is not being seen now, he said.

"Will this manage to escalate in coming days? I think this should be one of the key issues on our regulator's agenda," Pyanov said. The transfer effect of the exchange rate and the fact that it is not mirrored, meaning prices do not fall when the ruble strengthens, will make it harder to achieve the inflation target in 2025, he said.

VTB has not yet changed its forecasts for the exchange rate for 2024 and 2025, he added. "We're watching this effect on the screen right now, we don't fully understand the reasons for it, so it's important that we don't understand its duration. If this is a problem of a few days and then, perhaps, in early December these channels are cleared or bypassed, then reviewing the exchange is not a concern. The key thing is not how the exchange rate is fluctuating now, but at what level it stabilizes and when," Pyanov said.