Analysts at Deutsche Bank note that the CBR has cut its key rate by 50bps last week which was more aggressive than market expectations, to 9.25%.
“This is the second rate cut this year and follows the 25bps cut at the previous meeting in March as headline inﬂation continues to decelerate toward the central bank’s 4% target. We think it is likely that headline inﬂation will undershoot the target by end-Q2 and today’s aggressive cut shows the CBR’s reluctance to tolerate a sustained undershoot.”
“The CBR has also decided to factor in oil price developments relative to their baseline in future considerations on monetary policy, which we think is an indication of further loose monetary policy going forward. We expect another 125bps in rate cuts this year to take the policy rate to 8.00% by year-end.”