Created
: 2025.06.06
2025.06.06 19:09
The Central Bank of Russia's (CBR) had been expected to hold its key rate steady at today's meeting. This had been a majority view among analysts, including ourselves, until recently, but as of late, the consensus majority has shifted in favour of a 100bp rate cut today. This shift could be driven by a combination of weaker economic news-flow, flattening inflation path - annualised inflation is finally showing better dynamics, decelerating to 9.78%y/y as of 26 May - and possibly, a gradual pricing-out of favourable scenarios relating to a peace-treaty, or removal of sanctions, which would have provided automatic growth support, Commerzbank's FX analyst Tatha Ghose notes.
"Even as favourable scenarios are being priced-out however, the USD/RUB and EUR/RUB exchange rates stay fixed at low levels which they reached over the past quarter - this lack of any reaction probably reflects the 'artificial' nature of Russia's exchange rates. Fundamentally speaking, there is not much justification for exchange rate strength right now: the oil price has settled a good $10/bbl lower than its erstwhile $70-75/bbl range and this has already impacted Russia's oil and gas revenues (which fell by 35.4%y/y in May). Bank lending continued to slow down in April both for household and corporate loans - this is now a major driver of cooling demand."
"Of course, there are always some bullish counter-signals: the services PMI picked up in its last reading and retail sales and industrial output accelerated slightly, the latter because of defence spending. But on balance, the signs of economic slowdown are much more prominent. CBR itself has been acknowledging that this time the board might consider a wider range of options, leading some to predict even a 200bp rate cut. All this makes a rate cut the consensus favourite outcome now, even if not quite a done deal. If CBR does cut the rate, it will signal that the central bank realises that there is no further point in waiting for an external impetus from peace discussions or the like."
"In the US Senate and in the EU, further sanctions on Russia are being lined up, not the contrary - the EU is preparing its 18th sanctions package, which will target Russian energy and remaining sources of finance. We anticipate that a rate cut today will not impact the USD/RUB or EUR/RUB exchange rates, which are 'technical fixes' and recently have not moved even in response to significant geo-political developments. In the longer-term, we forecast USD/RUB and EUR/RUB to drift upward over the coming year."
Created
: 2025.06.06
Last updated
: 2025.06.06
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy