Russia: CBR’S 50bps cut as Christmas present - TDS

Paul Fage, Senior Emerging Markets Strategist at TDS, notes that the CBR cut the Key Rate by 50bps to 7.75% at its latest Board meeting, while TDS and the unanimous consensus had expected a 25bps cut.

Key Quotes

“The principal reason given for the larger than expect cut was that “the extension of the agreement between oilexporting countries lowers the uncertainty of energy prices’ dynamics and related pro-inflationary risks over a oneyear horizon”.”

“Looking forward the CBR said that it “will continue its gradual transition from moderately tight to neutral monetary policy and holds open the prospect of some key rate reduction in the first half of 2018”.”

“We think the CBR will keep slowly cutting next year and expect 75bp of cuts in H1 bringing the Key Rate to 7.0%.”