Russian central bank likely to cut policy rate in December on softer inflation

The Russian central bank is set to meet this week for its policy rate decision meeting. According to a Scotiabank research report, the Central Bank of Russia is likely to lower its policy rate. The lower inflation rate is expected to spur this decision. The headline rate had come in at 2.5 percent year-on-year in November, and is significantly lower than the 4 percent target rate. The core inflation had come in at 2.3 percent.

The headline inflation is at its lowest since the 3.6 percent. Some of the factors that drove the softness in inflation are believed to be temporary. However, the magnitude of the downside and the risk it has not bottomed yet are leading the central bank toward taking out additional policy insurance, stated Scotiabank.

“Since a peak three years ago, a quarter point cut next week would bring cumulative easing to nine percentage points’ worth of rate cuts”, added Scotiabank.

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