Commerzbank Sees Ruble Weakness as Policy Easing Continues

Key Moments

CBR Policy Call: Symbolic Cut or Tactical Pause?

Commerzbank strategist Tatha Ghose expects the Russian central bank to opt for another 50 basis point reduction in its key rate at the upcoming meeting, characterizing such a move as the “usual ‘symbolic’ 50bp rate cut.” Ghose notes that this outcome aligns with a unanimous market consensus.

At the same time, Ghose highlights that a decision to leave rates unchanged cannot be ruled out. The argument for a pause stems from a recent acceleration in inflation, driven by higher food and commodity prices, as well as reduced urgency to support activity in the near term due to an oil-price-related windfall for the Russian economy.

Shifting Tone Amid Inflation and Wartime Pressures

According to Ghose, any further easing would be consistent with the Russian central bank’s broader dovish turn in recent months. This shift has been underpinned by Governor Elvira Nabiullina’s expressed confidence that interest rates can continue to decline at upcoming meetings.

Ghose points to minutes from the February meeting, which emphasized improving inflation signals drawn from a range of high-frequency indicators. These data points bolstered the central bank’s conviction that the inflation trend had been moving in a favorable direction. Although price dynamics have shown some volatility since then, the most recent weekly readings are described as benign, coinciding with a pullback in oil prices from their March peaks.

Within this framework, Ghose characterizes ongoing rate cuts as a pragmatic response that tries to reconcile strict inflation targeting with the demands of a wartime economy, including what is described as political pressure for lower borrowing costs.

Less Dovish Messaging Expected

Despite the likelihood of a cut, Ghose anticipates a change in tone from the central bank. Market participants, he notes, broadly expect a less dovish communication, reflecting a global inflation backdrop that has deteriorated.

Ghose suggests the Russian central bank may now stress the need to keep monetary policy tight for an extended period and could flag the possibility of pausing rate reductions until later in the year.

USD/RUB Outlook: Path Toward 100.0 Remains Clouded

Ghose maintains a constructive view on the U.S. dollar against the ruble, continuing to forecast an upward drift in USD/RUB toward 100.0 over the coming year, although without a clear timeline.

The trajectory, Ghose emphasizes, is highly scenario-dependent. A “positive outcome on the peace treaty front” is cited as a key factor that could derail the move higher. Conversely, Ghose notes that USD/RUB might decline in the near term if the United States were to broaden exemptions on sanctions imposed on Russia in response to what is described as an energy market crisis “of its own making.”

Given these opposing forces, Ghose concludes that the precise timing of any rise toward 100.0 has become “ever unclear.”

Policy and FX Scenarios at a Glance