The Central Bank of Russia is set to meet this week for its policy rate decision. According to a Barclays research report, the central bank is expected to cut its key rate by 25 basis points. Inflation has continued to remain below expectations, easing to around 4.6 percent year-on-year as of mid-July.
Meanwhile, the Russian ruble has rallied. It is one of the best-performing EM currencies year-to-date, having risen by 10 percent against USD. Lastly, the external conditions continue to be favourable as expectations of easier policy in the developed world continue to build. Indeed, the Central Bank of Russia’s Governor Elvira Nabiullina struck a dovish note earlier in the month stating that a cut in July was “a possibility”.
“While at this stage risks are slightly skewed towards a bigger 50bp rate cut, recent comments from CBR officials suggest the Bank prefers to err on the side of caution and continue moving in 25bp steps”, added Barclays.
