CBR cut key rate by 150 b.p., to 12.5%

RUSSIA ENERGY / FINANCE - In Brief 01 May 2015 by Marcel Salikhov

Yesterday CBR’s of Board of Directors decided to cut the key rate by 150 b.p., from 14% to 12.5%. The market consensus was for 100-200 b.p. cut, so the decision was right in the middle. The cut was largely expected in the light of stabilizing inflation and RUB appreciation in the last three months. There was mild reaction on FX and money markets to the decision as it was already “priced in”. In accompanying press release CBR gave its updated forecast for inflation. According to its current forecast, slower growth in consumer prices will occur faster than it was previously expected. Monetary authorities expect that CPI will decline to 8% y-o-y by April 2016 compared to 9% annual inflation that was expected in March. CBR also noted ‘significant’ GDP decline in 1Q2015 caused by cyclical factors and rapid decline in real incomes and wages. Along with more optimistic inflation outlook concerns over economic recession we see it as an indicator of future cuts. The next meeting is scheduled for June 15.

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