Russia: Bank of Russia may finally resume the easing cycle - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that after keeping interest rates unchanged for almost a year, the Bank of Russia may finally resume the easing cycle at today’s meeting.

Key Quotes

“With inflation decelerating and the economy still in a recession, the key rate at 11% is excessively high. While the ruble is mainly driven by oil, it has one of the highest interest rates in the EM sphere, making it a magnet for speculative flows. This year, the Russian ruble has rallied more than 15% against the USD. This may undermine the competitiveness of their exports at the time when so many other countries are set to increase their share of the shrinking global trade by weakening their currencies.

With the Fed unlikely to raise interest rates over the summer and oil prices continuing their rise, Russian policy makers should cut rates to stem the ruble’s rally. Our EM FX-analyst Piotr Matys expects the Bank of Russia to trim the key rate by 50bps to 10.50%.”