Lars Christensen
Danske Bank A/S
This morning the Russian central bank (CBR) hiked its key policy rate once again – this time by 150bp to 9.5%. We had expected a 100bp hike. Initially, the hike helped the rouble a bit but gains did not last for long.
Overall, we do not think the CBR will be able seriously to curb the weakening trend in the rouble. Indeed, we think the primary consequence of the CBR’s continued attempts to prop up the rouble is to deepen further the recession in the Russian economy. Therefore, it is also a question of whether a further worsening of the growth outlook will eventually force the CBR to reconsider its hawkish monetary stance. This said, there are no signs that such a change is imminent. We expect further rate hikes.
Overall, today’s rate hike does not lead us to change our bearish outlook for the rouble but it further strengthens our view that the Russian economy will fall deeper into recession in coming quarters.
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