RUB: CBR provides a 200bp rate hike – Commerzbank

For some time, we have held a 200bp rate hike to then 18% as base-case for today’s Russian central bank (CBR) meeting. The consensus forecast has periodically swung towards more extreme outcomes in past weeks, but the median has converged back towards 200bp more recently, Commerzbank FX strategist Tatha Ghose notes.

CBR hikes interest rate up to 18%

“We can trace interest rate expectations moving higher until a month ago: the Bloomberg consensus forecast for CBR’s average key rate during 2024 stands at 16.15% (was 14.10% a month ago and 12.70% until mid-May) and that for 2025 stands at 11.85% (up from 9.80% a month ago and from 8.55% in mid-May).”

“Annual inflation decelerated to 9.2%y/y by mid-June, and PPI inflation also fell to 12%y/y. Weekly prices show stability. Meanwhile, the real economy has begun to cool down, with industrial output growth decelerating to slower than 2%, retail sales and employment growth moderating.”

“This would have made today’s meeting especially exciting under regular circumstances – where the bank rate would meaningfully affect the USD/RUB or EUR/RUB exchange rates – but in present day Russia, it cannot. Those ‘technical fixes’ are determined more by day-to-day trade flows in categories which can still be transacted in USD or EUR. Capital cannot flow in or flow out in response to interest rate differentials. In this sense, the outcome is FX-neutral and probably uninteresting.”