Ruble volatility is less of a factor, but the Fed will be followed closely by CBR

The ruble lost nearly 16.6% from its peak in early May and could have once again spurred an exchange rate-pass through. However, this was not the case as pass-through was seen to be outweighed by exchange rate spikes and regime-switching effects that took place at the end of 2014.

As CBR's survey shows, population downgraded expectations for the ruble for a one-yearahead period as portion of those who anticipate 'depreciation' rapidly increased in June.

As most still have a major preference for the ruble as a base currency for savings and the retail turnover of FX cash is currently dominated by selling from a domestic base, the CBR will hardly respond to the ruble correction. 

"Moreover, the CBR will unlikely revise its plans to replenish its international reserves unless ruble volatility escalates. This leaves the prospective initiation of a tightening cycle by the Fed as the sole material risk for the CBR's easing policy as blowing against the wind might accelerate capital outflows", says Societe Generale.

At this juncture, the CBR might continue easing with a moderate 50bp cut at the 31 July meeting. Should the Fed initiate tightening in September as our US economists anticipate, the CBR might take a pause for some time, but at least three of the four meetings left before the end of 2015 could be accompanied by 50bp cuts to reflect disinflation".

"The key rate will reach 10.0% by the end of Q4 15", added Societe Generale