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In line with the almost unanimous consensus, analysts at TD Securities expect the CBR to keep its Key Rate on hold at 7.25% at today’s Board meeting.

Key Quotes

“Since the last Board meeting on 27 July the inflationary outlook has clearly worsened. The ruble has depreciated by about 8% against the US dollar, and August headline CPI inflation jumped to 3.1% Y/Y from a prior 2.5%, although most of the move higher was due to food prices – core inflation was running at 2.6% Y/Y in August and so comfortably below the 4.0% target.”

“But consumer inflation expectations remain high, at 9.9% in August, boosted in recent months by ruble weakness combined with the announcement of VAT hikes at the start of next year.”

“On 4 September CBR Governor Nabiullina said that “there were factors in favor of raising interest rates at a meeting next week, even though most evidence still pointed toward leaving borrowing costs unchanged”.”

“We think that the CBR will want to await further developments, with the focus on future ruble movements, domestic inflation readings, and inflation expectations. The press statement will adopt a hawkish stance.”

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