Paul Fage, senior emerging markets strategist at TD Securities, expects the CBR to start a shallow easing cycle on Friday, and cut by 25bps.

Key Quotes

“We've held this view since end of April. The consensus is also almost unanimously leaning towards easing.”

“At the last Board meeting, on 26 April, the press statement held out the prospect of imminent rate cuts saying that "if the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of turning to cutting the key rate in Q2-Q3 2019".”

“Since then, inflation developments have been generally positive. CPI inflation in May was 5.1% y/y, down from 5.2% in April and further supporting the CBR's view that March's reading of 5.3% will be the peak for this year. Core inflation has edged up, to 4.7% in May from 4.6% in April, but is running a fair bit below headline. Since the April meeting USDRUB is almost unchanged, in spite of a fall in global oil prices. Added to all this the global financial environment has taken a distinctly more dovish tone.”

“So we see nothing in the way of the CBR cutting the policy rate by 25bps on Friday. We've held this view since the 26th of April, and the consensus has almost unanimously aligned to our view now.”

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