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Assessing the  Central Bank of the Russian Federation’s monetary policy statement, TD Securities’ senior emerging-market strategist Paul Fage argues that the first rate cut of this year could come at the June meeting.

Key quotes

“As we and the unanimous consensus expected, the CBR held the Key Rate at 7.75% at today’s Board Meeting.  However, in the press statement the CBR “admits the possibility of turning to cutting the key rate in Q2-Q3 2019″, while at the March meeting the timeframe for a cut was just specified as 2019. The CBR sees inflation as having peaked this year and that it will return to the 4% target in H1 2020.”

“We think the CBR will look to reverse relatively soon its two pre-emptive hikes from September and December of last year. The first cut could come at the June meeting with the next coming in September.”

“The ruble’s response to the prospect of imminent rate cuts has been fairly limited – USDRUB is currently just up 0.1%. We think the CBR’s generally cautious monetary policy in recent years has gained it a lot of credibility in the markets and we would expect the response of USDRUB to actual cuts to also be fairly limited.”