FXStreet (Edinburgh) – Strategist Vladimir Miklashevsky at Danske Bank assessed the recent decision by the CBR to cut rates by 50 bp.
Key Quotes
“The main reasons given by the central bank for the cut were “the considerable cooling of the economy despite a slight increase in inflation risks”.
“This reinforces the direction and credibility of monetary policy following the CBR’s U-turn in early 2015 as the economy started to shrink. The CBR reiterated its CPI forecast for June 2016, stating that annual inflation will fall under 7% and reach the 4% target in 2017”.
“The statement after the decision again sounded dovish and the CBR emphasized the importance of economic growth in monetary decision making”.
“As we expected, this week the CBR stopped its FX purchases once USD/RUB reached 60.00. The rouble strengthened after the halt in purchases then fell after the cut in the key rate to 61.00 against the USD”.
“We expect the rouble to weaken moderately in the long run, pricing gradual further rate cuts. We expect fair value to stay around 65.00-68.00 against the USD given the current oil price”.
“We expect the CBR to renew its FX purchases to replenish reserve funds if the oil price rebounds and USD/RUB dives under 60.00”.
(Market News Provided by FXstreet)