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According to Tatiana Evdokimova, analyst at Nordea Markets, the Bank of Russia has opened the door for a rate cut in June and the probability of this cut is more dependent on the way external risks play out.

Key Quotes

“The Bank of Russia (CBR) slightly surprised the market last Friday promising to start cutting rates as early as in Q2.  The bank thus has actually opened the door for a cut at the next meeting in June. This timing is more optimistic compared with the market view which implied the return to easing mode only in Q4.”

“The CBR is thus reacting to limited inflationary pressure as annualized monthly inflation returned to target in March.”

“The probability of the June cut is more dependent on the developments of external factors in our view.  External risks (EM FX volatility and increased geopolitical pressure) are higher than internal inflation risks.  If global financial markets remain relatively calm by the June meeting and sanctions talk is still muted the rate cut is very likely judging by the CBR signals made in the latest press-release.”

We thus revise our current CBR forecast from one cut in Q4 to 2 cuts in June and in September.”