Russia: Inflation slowdown leads to key rate cut – Nordea

The Central Bank of Russia (CBR) has cut the key rate following disappointing inflation data in January. Up to two more rate cuts are expected by analysts at Nordea. USD/RUB has soared to 64.2045, two-months high. 

Key quotes

“CBR has cut the key rate for the 6th time in a row at today’s meeting in line with consensus. The rate is now at 6%, a level considered by the CBR as a lower bound of the neutral range of 6-7%. Further cuts will thus turn monetary policy from neutral to accommodative.”

“The key reason behind today’s rate cut is continued inflation slowdown. Inflation dropped to 2.4% y/y in January (considerably lower than 4% target). But even more importantly seasonally adjusted m/m inflation keeps decelerating and since April 2019 remains below levels corresponding to the 4% target.”

“The key rate going below 6% this year now looks certain and given that current inflation trends remain very moderate up to two more 25bp cuts look possible.”