Russia: No fireworks coming today? - Rabobank

Analysts at Rabobank point out that the Bank of Russia will announce its decision at 12:30CET and even though the recent ruble rout makes the Bank of Russia a good candidate to hike rates, although Rabobank believe today to be too early for that.

Key Quotes

“The Russian currency depreciated almost 17% against the US dollar this year. The central bank estimates that a 10% fall raises inflation by 1 percentage point.”

“Even before the ruble extended its losses to the lowest level since early 2016, the central bank stated back in July that “the balance of risks is shifted towards pro-inflationary risks” on the back of uncertainty regarding the secondary effects of VAT rate hike.  However, the outlook for inflation has not deteriorated sufficiently in our view to justify a move just yet.”

“More importantly, it would be prudent to keep the powder dry in case the US decides to impose more sanctions on Russia. At this stage we expect Governor Nabiullina to rely mainly on hawkish rhetoric to support the ruble.”