Central Bank of Russia rate decisions in key commodity producers

A gradual path of rate cuts from the CBR appears justified following the real sector data last week that suggest tentative signs of bottoming.  The oil (Brent) in RUB terms has fallen 8% since the end of June, which will further pressure fiscal accounts and the growth outlook in Russia.

The CBR has cut during the past four meetings by 100-200bp for a cumulative 550bp. At the previous meeting, the CBR signalled that it will slow the rate of cuts during upcoming meetings and did not rule out possibly holding depending on the data. 

The CBR has reasons to continue cutting. Although inflation remains high at 15.3%, most of this inflation is old news from Q1. During Q2 prices increased only a bit over 1% (4% annualised). 

According to Barclays,

• The growth will decline in 2015 by -4%.
• Central bank is expected to cut by 50bp to 11.0% at the 31 July meeting.