Russian Ruble: CBR pause expected as inflation risks build – Commerzbank

Commerzbank’s Tatha Ghose expects the Russian central bank to keep its key rate at 14.0%, arguing inflation fundamentals do not justify further easing despite weak growth. He notes analysts’ inflation forecasts have risen, fuel and currency pressures persist, and President Putin now frames the high rate as a stability tool, suggesting political signals also favour a pause while RUB trades beyond Commerzbank’s year-end targets.

Policy pause likely with sticky RUB

"The Russian central bank (CBR) will announce its rate decision later today: market consensus is divided between an unchanged key rate of 14.0% and another “token” 25bp rate cut. We lean towards unchanged, which is also the median consensus result. In our view, a further cut would be difficult to justify because inflation fundamentals do not allow for more easing, and we are confident that CBR thinks so too."

"The latest CBR survey showed analysts raising their end-2026 inflation forecast to 6.6% from 6.2% in July and 5.3% in June. Inflation expectations are running much faster near the c.14% mark."

"A supportive argument for lower rates would be the weaker GDP growth numbers in latest readings and also falling survey expectations. But that still does not make it a benign combination: gasoline prices were up by nearly 1%w/w in its latest reading, while the weaker ruble adds another channel of inflation pressure. CBR’s own rhetoric has turned more hawkish too, highlighting secondary effects from higher fuel price, the weaker ruble, and fiscal risks."

"The political angle has also shifted. President Vladimir Putin remarked that the high key rate remains a deliberate tool for macroeconomic stability. This matters because, ahead of at least the previous two meetings, Putin had indicated that rate cuts would be desirable in Russia’s prevailing macroeconomic context."

"RUB has already depreciated past our year-end targets. Given its recent historical pattern, this valuation is likely to prove sticky for some months regardless of today’s rate decision, while the artificial USD/RUB and EUR/RUB exchange rates will not react meaningfully to a 25bp difference either way."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)