CBR likely to cut interest rate by 25 bps in December, USD/RUB likely to trade at 59.5 by end-2017
Source: FxWire Pro - Commentary / 07 Nov 2017 15:34:02 Eastern Standard Time
The Russian central bank, Central Bank of Russia is still expected to just moderately lower its interest rate in December. According to a Nordea Bank research report, the CBR is likely to lower its rate by 25 basis points despite continued inflation deviation from the 4 percent target. The current low inflation is considered temporary by the central bank, while the medium term risks are skewed to the upside.
With the higher possibility of OPEC+ deal extension and therefore more predictable external environment, four key rate cuts of 25 basis points are expected, stated Nordea Bank.
“We keep our RUB forecast for the end of 2017 unchanged at 59.5 against the USD. Given a brighter outlook for oil prices in 2018 we now see a possibility of a stronger RUB in 2018 (between 59 and 60vs the USD) than we previously expected (between 61 and 62)”, added Nordea Bank.
Nevertheless, falling interest rates would avert the Russian ruble from strengthening more in reaction to higher oil prices.
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