Russia: CBR rate decision is a close call – TDS

Analysts at TDS suggest that today's CBR rate decision is a close call as the consensus is almost evenly split with 21/41 respondents to the Bloomberg survey expecting the Key Rate to remain at 7.25% and the others expecting a 25bps cut.

Key Quotes

“We think there are a few issues which we think will cause the CBR to be cautious. The first is the general volatility of EM FX. While in recent weeks the ruble has performed relatively well, a number of EM CBs have had to tighten in order to support their currencies. The CBR might be averse to taking ruble stability for granted. Furthermore, Russia is pushing for a rollback of the production cuts it has agreed with OPEC, which is meeting in Vienna next week. The CBR may want to wait for the outcome of the meeting in case of any significant negative impact on oil prices.”

“Finally, although CPI inflation remains subdued, inflation expectations are high and they moved up in May to 8.6% Y/Y from a prior 7.8%. Although we think that the CBR will be able to cut further this year, on balance we think that they will be on hold today, to cut by 25bps at each of the July and September meetings. Governor Nabiullina will be holding a press conference after the decision.”