Central Bank of Russia likely to continue with moderate interest rate cuts – Danske bank
Source: FxWire Pro - Commentary / 27 Dec 2017 11:49:55 Eastern Standard Time
The Russian central bank, Central Bank of Russia, had lowered its key interest rate in December by a surprising 50 basis point to 7.75 percent, as compared with consensus expectations of a 25 basis point reduction. According to a Danske Bank research report, the central bank is expected to continue with its moderate cuts, bringing the key rate to 6.75 percent by the end of next year, keeping real rates highly elevated.
The nation’s inflation slowed further below the central bank’s 4 percent year-on-year target, recording 2.5 percent year-on-year in November, which is an all post-Soviet time low. Yet, the central bank intends to anchor long-term CPI around 4 percent year-on-year, which explains the CBR’s objective in a better manner.
“We remain bullish on the RUB in the long term, as high rate differentials prevail and the domestic story supports the currency”, stated Danske Bank.
Short-and medium-term prospects are foggier, but as external factors such as the oil price and geopolitics put notable pressure on the RUB. Possible introduction of the new anti-Russia sanctions by the U.S. by the end of January 2018 is serious short-to medium-term risk for the Russian ruble, Russian stocks and government debt.
“Worsening sentiment could pause foreign direct investment flows and accelerate inflation. Upside risks come from an increasing oil price and improving relations with the West”, added Danske Bank.
FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest© FxWire Pro 2018. All rights reserved. The FxWire Pro content received through this service is the intellectual property of FxWire Pro or its third party suppliers. Republication or redistribution of content provided by FxWire Pro is expressly prohibited without the prior written consent of FxWire Pro, except for personal and non-commercial use. Neither FxWire Pro nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.