Russian Ruble: CBR credibility risks after cut – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank’s Tatha Ghose reports the Russian central bank cut its key rate to 14.0% despite raising its 2026 inflation forecast and projecting stagflationary macro conditions. He argues the easing cycle suggests political pressure and would normally hurt FX valuation, but stresses USD/RUB and EUR/RUB are artificial rates, so the move should not significantly affect the Ruble’s market value.

Rate cuts under stagflationary outlook

"The Russian central bank (CBR) cut its key rate by 25bp on Friday to 14.0% even after raising its inflation forecast. The outcome was not expected by the majority, but was always a scenario within the range of expectations. CBR raised its 2026 inflation forecast to 6.0%-7.0% from 4.5%-5.5%, blaming the considerable rise in fuel prices, while still claiming that inflation will return to the 4% target in 2027."

"CBR lowered its 2026 GDP forecast to 0.0%-1.0% from 0.5%-1.5%, cut the oil-price assumption for taxation to USD 60/bbl from USD 65/bbl, and reduced the current-account surplus projection to USD 48bn from USD 72bn. In short, the macroeconomic outlook is stagflationary."

"CBR appears to ex-post justify the rate cut by arguing that underlying inflation will be contained: SAAR inflation averaged 5.0% in Q2 after 8.7% in Q1 (core inflation slowed to 4.2% from 6.2%). Measures of underlying inflation reportedly continue in the 4%-5% annualised range."

"But this defence is not fully convincing. Recent inflation accelerated in June-July, reaching 5.9% as of 20 July, and inflation expectations of households, businesses and financial market participants went up. If expectations remain elevated, CBR itself admits that this may impede a sustainable slowdown in inflation."

"Still, the FX market does not like a central bank which is under political pressure to lower interest rates. In any normal market, a central bank cutting rates while raising inflation forecast would hurt credibility and weigh on FX valuation. Russia is not a normal market. USD/RUB and EUR/RUB are artificial exchange rates, and this decision will not impact RUB valuations noticeably."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY approaches 158.00 as Japanese Yen resumes decline

USD/JPY is resuming its upside in the European session on Friday, refreshing two-week highs and nearing 158.00. The Japanese Yen extends losses, despite the Bank of Japan's (BoJ) expected rate hike to 1.25% and hawkish Governor Ueda's comments, as two surprise dissents against the rate hike weigh on it.

Gold keeps the bid tone in place; still below $4,400

Gold adds to the optimism seen in the second half of the week, trading with decent gains just below the $4,400 mark per troy ounce on Friday. The precious metal’s advance finds traction in declining crude oil prices and fresh selling pressure on the US Dollar.

Why altcoin season isn't coming back — and what stole its capital

If, after two years of being frozen in ice, Katara and Sokka woke you up to the crypto market, it would seem like 100 years have passed. With Bitcoin soaring to record highs just over a year ago, everyone expected a routine altcoin season, where investors take profits from the top crypto to chase higher returns in altcoins.

BoJ Recap: Not as hawkish as expected

The BoJ raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks. Governor Kazuo Ueda said the policy phase had changed.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.