Russian inflation continues to slow down, CBR likely to cut rates further

The pace of inflation in Russia continues to slow down sharply. Russia’s consumer price inflation decelerated to 3.3 percent year-on-year, while on a sequential basis consumer prices dropped 0.5 percent. This signifies that the central bank’s target of lowering inflation to 4 percent by the end of 2017 has been more than realised, noted Commerzbank in a research report.

The recent price developments signify that the central bank, Bank of Russia, now has scope for additional rate cuts, stated Commerzbank. The Russian ruble reacted positively to the lower than expected inflation rates on Tuesday.

Firstly, this is because of the now high real interest rates levels and due to the fact that it could be expected that the central bank would only lower rates cautiously. Along with the positive economic data, this evidently weighs more heavily than the difficulties in the private banking sector that recently compelled the central bank to carry out another bailout. According to Commerzbank, some further upside for RUB is expected in short term.

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