Russian Ruble: Policy pause likely as inflation risks linger – Commerzbank

Commerzbank’s Tatha Ghose expects the Russian central bank to leave its key rate unchanged at 14.0%, in line with consensus. He argues inflation dynamics and fiscal risks justify a pause, and notes CBR’s medium-term rate forecast for 2027 may be revised higher. The Ruble has started to appreciate modestly, but its weak link to trade fundamentals clouds the outlook.

CBR seen holding at 14 percent

"The Russian central bank (CBR) will announce its key rate decision later today: market consensus almost unanimously forecasts an unchanged rate of 14.0%, and we agree."

"Inflation remains the clearest argument for a pause. Month-on-month inflation slowed to 6.5% (seasonally-adjusted, annualised) in September from 7.5% in August, but the three-month average is still 8%. October’s unusually late and larger utility tariff increase has already pushed annual inflation faster than 7%. "

"Weak activity provides some argument for lower rates: GDP growth reached only 0.8%y/y in August, industrial output contracted by 0.6%y/y and manufacturing PMI remained in contractionary territory. But government-supported sectors and subsidised lending are less sensitive to interest rates, while corporate lending remains elevated. Meanwhile, CBR did cut rates in past quarters precisely to provide some support."

"Inflation fundamentals do not particularly support renewed easing, while the main focus will be CBR’s revised medium-term projections and guidance regarding future policy. CBR currently forecasts an average key rate of 10.5%-12.5% in 2027, but this range could be revised up, probably by even 1pp."

"The ruble is mildly appreciating at last, after several months of remaining weak despite high Urals price realisation an improving Russian trade surplus. Given the exchange rate’s weak link to trade fundamentals, however, this trend may or may not extend over the coming month."