Instant Insight/ Russia: CBR policy meeting preview
Amid market turmoil, EM central banks need to send a message that they remain in control. Against the backdrop of weaker growth and subdued inflation in Russia, the CBR will likely continue easing at its February meeting despite the choppy global waters. We expect a 25bp cut, and see a potential for a 50 bp reduction in the key rate by the end of the current quarter.
Also, we think the markets are too quick to dismiss the threat of US imposing further “biting” sanctions on Russia. The generic nature of the “Kremlin list” published in the end of last month and the admission by the US Treasury that extending sanctions to Russian sovereign debt would hurt US investors have alleviated market concerns. However, we have little doubt that the usual anti-Russian lobby in both houses of the American parliament will continue to exert pressure on the administration to broaden the existing sanctions.
A large downward move in the oil prices remains another key risk. We expect the CBR to put easing on ice if any of these risks crystallize.
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