Bank of Russia may keep key rate on hold at next week’s MPC meeting

Inflation indicators have been relatively positive since the last meeting in mid-September, when the CBR held its key rate unchanged after five consecutive cuts since January 2015. 

"Therefore, the Bank of Russia (CBR) is expected to keep its key rate on hold at 11.0% at next week's MPC meeting. It would be premature for the CBR to reinitiate rate cuts without clearer indications that inflation is on a declining path", says Barclays. 

The RUB has appreciated by almost 10% since mid-September, offsetting some of the 35% depreciation between May and mid- September. This has taken some of the pressure off weekly inflation, but it is still relatively high and additional pass-through remains possible. If the RUB were to start depreciating again, inflation could reaccelerate. Therefore, it is assumed that the CBR would not want to risk.

"Hence, the CBR is expected to decide that cutting now would be premature. Instead, we expect a series of 50bp cuts to commence at the next MPC meeting, in December. This is consistent with our baseline scenario of stable or higher oil prices leading to RUB stability", added Barclays.