Russia: CBR to continue to cut rates – Danske Bank

Analysts at Danske Bank point out that last Friday the central bank of Russia (CBR) cut its key rate by 25bp with the majority of both Bloomberg's and Reuters' consensus while approximately one third of interbank traders presumed a 50bp cut.

Key Quotes

“In its statement the CBR emphasised sustainably low inflation (2.2% y/y currently) and decreasing inflation expectations. Yet, the CBR expects inflation to accelerate by the end-2018 to 3-4%, anchoring around the desirable target of 4% in 2019. The CBR communicated clearly it will continue to cut rates achieving the neutral rate in 2018, which is somewhere between 6-7%.”

“Given the current path, we expect the key rate to fall to 6.25% by the end-2018. RUB's reaction to the decision was neutral as we expected, neither the central bank governor's dovish tone at the press conference brought any turbulence. Looking forward we see geopolitical risks being major movers for the RUB in both directions.”