CBR likely to continue rate cuts in 2016 on falling inflation

The Central Bank of Russia is likely to resume monetary policy easing after an extended halt, as the disinflation persists and as we move into 2016, the inflation figures are prepared to drop significantly on the base effects and lower activities.

Nevertheless, prolonged tightening will be very destructive for Russian economy, increasing the downside risks of GDP anticipations for next year.

"We expect the gradual monetary easing and the key rate to fall to 7% in late 2016, which would support the restoration of economic growth", says Danske Bank in a research note. 

By ignoring weak economic prospects and enhancing the focus on inflation with RUB volatility, the central bank might encounter a vicious circle, tight monetary conditions with a weak oil price is likely to depress economic activity ahead, with no impact on either inflation of non-monetary origin or on a weak RUB.

The currency weakness follows oil price and global EM sentiment ahead of the Fed's rate decision in December.