Monetary Policy decision: Rouble sets the tone for CBR

It was a very close call, but the Central Bank of Russia opted to leave its key interest rate unchanged at 11.00% in October following an accumulative 600bps of cuts since the beginning of the year. The main reason behind this more cautious approach is the renewed depreciation of the rouble, which in turn prevented a further deceleration in inflation. 

It is worth pointing out that the CBR will hold its last meeting this year on December 11 - only a few days before the Fed. Given that it is well possible that the Fed raises its policy rate in December for the first time since 2006, USD/RUB should end this year trading closer to the year-to-date high set at 71.80 rather than the yearto-date low of 48.16. 

In other words, the CBR may end this year with the key rate unchanged at 11.00%, unless the RUB rallies against the USD.