US Dollar/Russian Rouble FX Spot Rate

Commerzbank analyst Tatha Ghose expects the Russian central bank to keep its key rate at 14.0%, arguing that inflation fundamentals do not justify further easing despite weak growth. The call points to a pause rather than a cut at the upcoming decision, with building inflation risks cited as the reason the CBR is unlikely to loosen policy. Ghose's view rests on the gap between subdued growth and still-uncomfortable price pressures, which he says leaves no room for additional easing. The forecast keeps the focus on the central bank's next rate announcement and whether it holds at 14.0% as Commerzbank anticipates.

Russia's central bank will decide at Friday's meeting whether to pause its rate-cutting cycle, with the choice likely coming down to holding the policy rate at 14% or trimming it by a modest 0.25% to 13.75%, amid rising inflation risks from fuel supply problems and accelerating government spending. Russia's annual inflation has picked up again to 6.3% after increased attacks on oil refineries, which have worsened fuel shortages and pushed up gasoline prices. Alexei Zabotkin, deputy governor of the Russian central bank, said fuel-related effects have added roughly 1.5 percentage points to price growth, and the central bank will not have new forecasts until October. President Vladimir Putin, meanwhile, said the high policy rate is a deliberate and necessary decision to preserve macroeconomic stability, in contrast to July, when he twice signalled that rates should be lower. Most economists surveyed by Bloomberg expect the Russian central bank to hold rates at this meeting, with only 3 of 11 expecting a 0.25% cut to 13.75%. Herman Gref, chief executive of Sberbank, said the central bank may take a tactical pause while it assesses the situation, but could still cut rates to 13-13.5% by the end of the year, and that the economy will only begin to see meaningful easing once rates fall to 10-12%.

Commerzbank expects Russia's central bank to keep its key rate at 14.25%, resisting political and economic pressure for a cut. Surging inflation expectations, higher oil and commodity prices, and accelerating Consumer Price Index argue against easing, according to Commerzbank's Tatha Ghose.

The Russian Central Bank cut its key interest rate by 25 basis points to 14.25%, surprising markets that had expected a 50-basis-point reduction. Commerzbank’s Michael Pfister said the smaller cut signals a hawkish stance and caution on further easing.