With high probability the Bank of Russia will leave rates unchanged

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The final chord of this week is the meeting of the Central Bank, which traditionally will make a decision on the key rate. Today the rate is 7.25 percent. Most recently, the head of the CBR Elvira Nabiullina said that the Central Bank can both decrease and increase rate, which is now very close to target of 6-7%.
From our point of view, the CBR will leave rates unchanged. There are two reasons. The first is political. On the background of the world championship on football the regulator does not need any additional volatility in the foreign exchange market. The demand for the ruble from the foreign fans will lead to a slight strengthening of the ruble. The second is economic. It is expected the growth of inflation against the background of economic recovery and rising fuel prices. The target with the consumer price index of 4% can be taken at the end of the year.
From our point of view, the decision of the CBR to keep rates unchanged will have no impact on the ruble and the Russian financial markets. This solution is already in the prices. Do not forget that during football matches the activity of the players of the financial market traditionally declines. I probably will this time.
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Alexander Razuvayev,
The Director of analytical Department,
Alpari