The CBR will meet on Friday 29 January. The key rate cut could once again be postponed because of the volatile RUB and corresponding inflationary risks.

Since the beginning of January, the Russian currency has lost ~8% against the USD (losing 13% when the currency reached its lowest level in January). The RUB has been among the worst performers so far in 2016 as it is one of the currencies more sensitive to the oil market, which has revisited the lows since 2003.

As long as the CBR continues to follow its inflation targeting policy, the bank may leave the key rate unchanged. Increased inflationary risks stemming from a weakened RUB may become a focal point in the statement.

"Due the high base effect, annual inflation numbers will likely continue to contract and we still expect that the CBR may resume its easing measures in 2016, but the timing will depend on the RUB performance. The economy still needs monetary stimulus - last year GDP declined by 3.7% as we expected and the coming at least two quarters will be very tough given the commodity market weakness", says Nordea Bank.

If the CBR keeps its key rate unchanged, the RUB and the money market will continue to trade without big changes. If the CBR surprises the market with a rate cut, this may have a negative impact on the RUB and USD/RUB may temporarily move closer to 80.