CBR cut key rate by 50 b.p., to 11%, no guidance on next moves
CBR’s of Board of Directors decided to cut key rate by 50 b.p., to 11%, as it was generally expected by us and different surveys. But market reaction to the news was relatively strong. After the publications of press-release RUB lost some about 0.8% to major currencies. It seems that were some expectations ‘priced in’ that CBR might keep rates unchanged. For example, FT wrote today (before the decision) that “central bank’s head, Elvira Nabiullina, had warned Russian business leaders at a closed-door session last week that the central bank would not lower rates this week “, citing Izvestia, Russian daily. As it is evident now, the rumor was not true. In accompanying press-release CBR noted worsening economic conditions in 2Q15 compared to 1Q. Due to weak 2Q numbers forecast for 2015 can be revised down. Increased probability of low oil prices (below $60/ barrel) is also observed. We note that there’s no forward guidance on next moves compared to June meeting. We think that next meeting (scheduled for September 11th) will be condition-based dependent on oil prices and domestic inflation. In general today's decision confirmed no hawkish in CBR.