Russia: 100bps of rate cuts by year end – TDS

Analysts at TD Securities point out that the CBR will announce rates on Friday, 25 October and they see little doubt on the direction - lower - that rates are unanimously expected to take.

Key Quotes

“The debate is focused on the magnitude of the cut. We have revised our forecast to expect two consecutive 50bps cuts in October and December. Previously, we had forecast two consecutive cuts of 25bps at each of these meetings. This would imply that the Key Rate will find its terminal level at 6.50%, i.e. the mid-point of the 6-7% range where the CBR thinks the neutral rate is situated. This expectation, however, seems too conservative in light of the rapidly evolving external context and more favorable domestic conditions for easing.”

“We now see the Key Rate finishing 2019 at the lower bound of it its neutral range. In fact, CBR Governor Nabiullina has recently mentioned that "space for further easing of monetary policy" has opened up. This is the second time Nabiullina voices similar comments.”

“Not only does this indicate that the CBR is likely to cut this month, in our view but also that they may cut by more than 25bps. Further comments from Nabiullina suggest that the CBR may be willing to front-load the remainder of its easing cycle.”