CBR likely on hold as RUB weakens

It would be premature for the Bank of Russia (CBR) to cut at this time. Inflation in Russia remains elevated at 15.7% y/y in September and it is expected to stay at the same level in October. Weekly inflation has picked up slightly due to recent RUB depreciation. A cut at this time would likely increase RUB vulnerability, argues Barclays. 

This week Brent oil prices fell below $47 per barrel, causing the RUB to depreciate back to 65 after temporarily touching 62 earlier this month. Further RUB weakening could risk sparking renewed inflation pass-through. Recall that in July 2015, the CBR continued cutting rates while the RUB was weakening, which led to further deprecation and a reacceleration of weekly inflation.

The CBR is expected to keep its key rate on hold at 11% for a second consecutive meeting on Friday (30 October), says Barclays. The Bloomberg consensus is split evenly between those calling for a cut and those that think the CBR will remain on hold.