CBR to cut by 25 bp tomorrow – Danske Bank

Vladimir Miklashevsky, Senior Economist at Danske Bank, expects the Russian central bank (CBR) to cut its benchmark rate by 25 bp to 9.50% at its meeting on Friday.

Key Quotes

“We expect the CBR to cut the key rate by 25bp to 9.50% on 28 April, as inflation approaches its target and inflation expectations fall further”.

“Yet, we do not exclude a 50bp cut, as the RUB’s enduring strengthening on high carry becomes a headache for Russia’s economic authorities”.

“We expect the CBR to continue cautious monetary easing, hitting 8.50% by end-2017”.

“We do not expect a strong reaction in RUB after the meeting if the CBR does not deliver any surprise and its consistency holds. If the CBR cuts more than 25bp, the RUB’s weakening would be temporary, as lower rates in Russia have traditionally attracted flows through expectations of better economic prospects spurring demand for both local stocks and debt”.