RUB likely to weaken moderately over next 3 months

Russia's central bank is expected to discuss on a bank rate in their today's meeting. CBR is expected to start expansionary monetary policy after a long pause as the inflation rate is set to fall next year. However, it expects the imposed restriction on food imports from Turkey will have a limited impact on inflation. The Bank is expected to cut bank rate by 50bp to 10.50%, foresees Danske Bank.

Analysts argue the neglecting economic growth and concentrating on inflation expectation and currency volatile may cause the central bank to face vicious circle. Moreover, a gradual monetary easing would support the Bank to restore economic growth.

"We expect the RUB to weaken moderately against the USD over the next three months to 71.00 and 73.00 in 12M. In the short run, we expect the Fed's tightening to weigh on the RUB and emerging markets assets globally. In the long run, we believe the RUB rate will be determined by the oil price, current account surplus and economic growth", argues Danske Bank.