Russia Instant Insight: CBR cuts its policy rate by 25bps, sounds dovish
Today the CBR cut its policy rate by 25bps to 7.50%, in line with the market forecast and our expectations. The meeting minutes transmit a dovish signal, as the CBR has explicitly stated its intention to continue easing as it sees a much lower probability of inflation exceeding its target in a near term. However, it has also communicated that its easing cycle is likely to end this year. We continue to see a 25bp cut in March. However, we also see an increasing risk of another drop in the oil price in the coming months, which should force the regulator to halt its easing cycle.
In its release, the CBR notes that uncertainty over the situation in global markets has increased. In our opinion, the on-going global market turmoil has contributed to its decision to reduce the pace of easing to 25bps vs. 50bps in December. We think that if the CBR abstained from easing today, this would have perplexed the markets given a strongly disinflationary environment in Russia. On the other hand, keeping the pace of easing at 50bps could give the market a wrong signal in an environment of rising US Treasury yields, and provoke a sell-off in local bond and FX markets.
WHY EMERGINOMICS?
- Original take on geopolitical, economic and oil market developments
- Thematic research on hot topics
- Face-to-face meetings and presentations upon request
- Independent views not influenced by the need to comply with a “house view” or priorities imposed from above.
MEET THE FOUNDER. Tatiana Orlova holds a MSc in Economics from the LSE and has worked as an Emerging Market economist and strategist since graduation in 2001. She has been employed in EM research teams in four investment banks covering a diverse range of CEEMEA economies, with a particular specialism in the post-Soviet economies.
Tatiana is a widely known expert on the post-Soviet economies who has given multiple interviews to major world financial media (such as FT, Bloomberg, Reuters, CNBC etc) and spoken at conferences attended by hundreds of clients. Tatiana’s unique background and experience, as well as her deep knowledge of the region’s economics, history and geopolitical realities, allows her to make accurate forecasts and predictions across the range of Fixed Income instruments. She has covered the region’s hydrocarbon producers during the oil crises of 2008-2009 and 2014-2016, and issued a range of successful calls. Most notably, in September 2014 she predicted that Russia was about to lose its investment grade sovereign rating, which was a highly non-consensus view. Similarly, she correctly called imminent downgrades of sovereign ratings of Azerbaijan and Kazakhstan during the following winter. She also has a track record of successful FX and interest rate recommendations.
GET ACCESS TO EXPERTISE IN AN UNDERSUPPLIED MARKET
MIFID II forces big banks to switch to paid subscriptions by Mifid II as of 3 January 2018. Clients who subscribe to standard research packages covering emerging economies in the CEEMEA region may find themselves paying for run-of-the-mill research of variable quality, not always addressing the hottest topics affecting asset prices in a timely manner. Banks have already slimmed down their research teams substantially, and this process will likely continue after the new rules have kicked in. The cuts have already translated in a lack of resources and expertise to provide in-depth macroeconomic coverage, especially of smaller economies in the region.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.