30 Jan 2015
Pressure on RUB might intensify after today's rate cut by CBR – TDS
FXStreet (Barcelona) - Cristian Maggio, Head of Emerging Markets Research at TD Securities feels that the Russian Central Bank’s surprise act of reducing interest rates to 15% might further pressurize the RUB, and result in events opposite to what was desired by CBR.
Key Quotes
“The CBR surprised the market by cutting the key rate by 200bp to 15.00% today.”
“The initial RUB reaction to today’s announcement has been limited, as USDRUB moved ‘only’ 1.4% higher in the 15 minutes following the rate cut, which is fairly contained by recent ruble standards. At the time of writing, however, the ruble is selling off more aggressively and turning into the usual moving target, as we would have expected given the circumstances.”
“This decision was somewhat anticipated by CBR Chairwoman Nabiullina who mentioned earlier today that the CBR was sensible to the issue of FX mortgage loans and was considering measures to alleviate pressure on these loan holders.”
“Unfortunately, we do not agree on the decision and think that negative RUB pressure will intensify, achieving the opposite result of adding even more pressure on entities holding FX-denominated debt in Russia.”
“Today’s decision could either be a watershed moment for Russian monetary policy, with the CBR drifting away from CPI targeting and allowing more RUB vol (we think this is a 25% probability scenario), perhaps motivated by some degree of political pressure (and the replacement of the CBR Head of Monetary Policy and First Deputy Governor Ksenia Yudaeva with Dmitry Tulin could be a sign of this new course), or more likely a policy mistake that may require corrections in the near future, i.e. emergency tightening ahead of the next scheduled meeting on 13 March (45% probability) or at a later stage (30% probability).”
Key Quotes
“The CBR surprised the market by cutting the key rate by 200bp to 15.00% today.”
“The initial RUB reaction to today’s announcement has been limited, as USDRUB moved ‘only’ 1.4% higher in the 15 minutes following the rate cut, which is fairly contained by recent ruble standards. At the time of writing, however, the ruble is selling off more aggressively and turning into the usual moving target, as we would have expected given the circumstances.”
“This decision was somewhat anticipated by CBR Chairwoman Nabiullina who mentioned earlier today that the CBR was sensible to the issue of FX mortgage loans and was considering measures to alleviate pressure on these loan holders.”
“Unfortunately, we do not agree on the decision and think that negative RUB pressure will intensify, achieving the opposite result of adding even more pressure on entities holding FX-denominated debt in Russia.”
“Today’s decision could either be a watershed moment for Russian monetary policy, with the CBR drifting away from CPI targeting and allowing more RUB vol (we think this is a 25% probability scenario), perhaps motivated by some degree of political pressure (and the replacement of the CBR Head of Monetary Policy and First Deputy Governor Ksenia Yudaeva with Dmitry Tulin could be a sign of this new course), or more likely a policy mistake that may require corrections in the near future, i.e. emergency tightening ahead of the next scheduled meeting on 13 March (45% probability) or at a later stage (30% probability).”