July 22, 2022 11:05 GMT
- The CBR decided to cut its policy rate more than expected in today's meeting, down to 8% (vs. 9% exp.), from 9.50% previously.
- The central bank also added that it will consider further cuts in the second half of 2022.
- Interestingly, EURRUB spot rateis barely unchanged following the decision, currently trading at around 58.90.
- We previously saw that investors have been questioning in the past few weeks if the Ruble ‘recovery’ was ‘real’ or just an ‘illusion’ as some analysts are expecting a sharp contraction for 2022.
- Today’s decision also confirmed that the current spot rate may not reflect the ‘fair’ rate given the current environment.
- Any other EM central bank cutting rates more than expected would have seen its exchange rate collapse, particularly considering the elevated level of risk aversion.
- Our MNI ‘fair’ value model is still pricing in an exchange rate closer to 100 than 60 (see chart).