CBR’s easing cycle not over yet – Danske Bank

Aila Mihr, Analyst at Danske Bank, assessed the recent stance by the Russian central bank (CBR) at its Friday’s meeting.

Key Quotes

“Russia’s central bank (CBR) cut its key rate by 25bp to 7.50% on 9 February, as inflation has hit its post -Soviet low at 2.2% y/y. At the same time, the CBR sounded dovish in its statement announcing completion of ‘the transition from moderately tight to neutral monetary policy in 2018’.

“From now, we expect the CBR to cut to 6.50% (previously 6.75%) by the end of 2018 and to 6.00% by the end-2019, given no geopolitical ‘black swans’ or crude price crush. Traditionally and as we expected, the RUB reacted positively to the CBR’s decision immediately following the announcement”.

“Yet, on Friday afternoon, the USD/RUB bounced back to its opening levels. The Russia-friendly assessment by the US Treasury this week and an unwillingness to sanction Russia’s government debt or other financial instruments has cheered up RUB sentiment”.