Russia: CBR set to trim its key rate - Rabobank

Today, Russia gets to close ‘central bank week’, and is likely to do so with a rate cut as with inflation hovering just above the official 4% target and inflation expectations falling further, albeit still relatively high at 10.3% y-o-y, the Bank of Russia is set to trim its key rate at today’s meeting, explains Bas van Geffen, Quantitative Analyst at Rabobank.

Key Quotes

“Governor Nabiullina explicitly said that policy makers will deliberate whether to lower the borrowing costs by 25bps or 50bps. It is a very close call, but in our view the CBR has room to deliver a 50bps cut. While rising inflationary pressure from food (mainly fruits and vegetables) could be used as an argument in favour of a cautious approach, the negative impact should be relatively short-lived. Lowering rates by 50bps can be also interpreted as a growing conviction at the CBR that inflation can be anchored in a sustainable way to the 4% level over the long-term horizon.”