RUB: 200bp cut delivered, more coming - Commerzbank

The Russian central bank (CBR) cut its policy rate by 200bp to 18.0% last Friday, matching market expectations. This move followed recent disinflationary developments where the seasonally-adjusted annualised inflation rate already reached CBR's 4% target. However, despite softening inflation, CBR maintained a neutral tone and flagged persistent pro-inflation risks on account of elevated inflation expectations, a tight labour market, and weaker terms of trade. Governor Elvira Nabiullina reinforced this cautious stance at her press conference: she emphasised that the balance of risks still points to inflation overshooting the target and noted that recent disinflation should not be over-interpreted - current inflation is still running above target in year-on-year terms (9.2% y/y); she views the recent softness in inflation to be due to temporary factors, including price corrections in some volatile categories, Commerzbank's FX analyst Tatha Ghose notes.

RUB has hardly moved

"On rate guidance, Nabiullina warned that Friday's move does not necessarily mark the start of an easing cycle. While further cuts are possible, decisions will remain data-dependent and may be delayed if inflation risks re-assert themselves. This, of course, is routine central bank speak. We expect the key rate to be cut once again at the next meeting by 100bp. The revised macro forecasts support further cautious easing: end-2025 inflation is now seen at 6.0-7.0%, down from 7.0-8.0% earlier, and the average key rate forecast for 2025 has been lowered to 18.8%-19.6% (from 19.5%-21.5%), implying a policy rate range of 14%-18% for the remainder of the year."

"Still, GDP and consumption projections were left unchanged, and external assumptions were worsened. Lower oil prices and a shrinking current account surplus are now embedded in the CBR's outlook. Altogether, Friday's decision and forecast revisions do not impact the Rouble's outlook very significantly, in our view. As far as the artificial USD/RUB and EUR/RUB exchange rates are concerned, there could be a perception that the Rouble has appreciated strongly over the past quarter - but this would be a mis-interpretation - we are simply looking at USD weakness."

"Against any major non-USD currency, for example the euro, the Rouble had one good month in February 2025 when US president Trump first made his pro-Russia stance clear and optimism arose regarding the end of the war and possible removal of some harsh sanctions. That rally aside, the Rouble has just traded sideways. In recent days, it did weaken slightly and this move extended on Friday - in this sense, one could say that the rate cut, followed by the lower key rate forecast, had some impact - but rather modest. Over the coming year, we see the Rouble depreciating significantly versus the USD and the euro."