Last week, the Russian Central Bank maintained its rate-cutting agenda by slashing rates for the fifth time this year.
However, the bank altered its rhetoric this time around and the market isn’t sure what happens next.
In its latest statement, the CBR took out the phrase “ready to continue cutting,” signalling a potential shift in the central bank’s strategy.
And according to what some analysts told Bloomberg, for the first time in months the central bank’s next move isn’t obvious.
“The central bank doesn’t want to promise any clear steps,” Dmitry Polevoy, chief Russia economist at ING Bank Eurasia in Moscow, told Bloomberg.
Notably, the bank’s four-word omission follows last week’s plunge in the ruble.
In that drop, Russia’s currency
erased nearly all of its 2015 gains, dropping below 60 to the US dollar for the first time since March.
“Policy makers are no longer committing themselves to lowering interest rates further,” Liza Ermolenko, an analyst at Capital Economics, told Bloomberg. “
Future interest rate decisions are likely to be determined by moves in the currency.”
The bank has been cutting rates this year in response to the weaker economy, but some analysts previously suggested that a ruble plunge could inspire the bank to interrupt their rate-cutting agenda.
“On the one hand, the recession in the economy and extremely tight credit conditions argue for a rate cut,” Ermolenko told Bloomberg. “But on the other hand, easing policy at the time when the ruble is weakening sharply could cause it to fall even further, creating risks for inflation and financial stability.”
Currently, the ruble is trading near fresh lows of around 62.7 per dollar.