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CBR Likely to Hold Despite Recent Swings in Currency

RUB
  • USDRUB on the MICEX exchange pierced the Aug 15 low yesterday and ended the day lower for the fourth consecutive session - despite the majority of the day’s losses being pared. The pair stands ~1.1% higher today, highlighting the volatility of the currency in recent weeks.
  • CBR officials have expressed concern with recent RUB dynamics, having noted in its previous policy statement that “the pass-through of the ruble’s depreciation to prices is gaining momentum and inflation expectations are on the rise.”
  • Nevertheless, USDRUB is below the 100.00 level where the CBR announced the emergency MPC meeting, meaning the CBR likely has sufficient room to hold the key rate steady at their meeting on Friday.
  • The majority of sell-side analysts expect rates to remain unchanged due to hikes having already been frontloaded with a 350bp increase in August. However, there remains outside risk of an additional hike as the Bank look to juggle a recovery in the inflation rate, curtailed export revenues and domestic financial fragility via the FX channel. See our full preview here: https://roar-assets-auto.rbl.ms/files/55690/MNICBR...
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