RUSSIA – CBR Rate = 16 Percent (obid 16 Percent/ previously 15 Percent). Ruble Little Changed at 90/USD

The Russian ruble looks stumbled over enlightenment that it excessively strengthened in the previous days, partially playing back and backing off from unrealized expectation of a rate increase by 200 points.

However, the Central Bank today has returned to pragmatism and did not surprise observers with any sensational steps. Probably, the balance in his perception between inflation and the subsequent slowdown in economic growth due to the tightening of the monetary policy (the time lag here is quite prolonged, from 6 to 12 months) required a cautious approach. As a result, after losing direction for a short while, the ruble began to edge down, but very moderately, by only 35 kopecks against USD.

It is unlikely that we will see a stronger reaction on Monday. The ruble now lives in the new reality of a certain currency corridor with completely different, sometimes incomprehensible to an observer, drivers. This corridor looks tunneled between 85-100/USD.

The upward deviation of the Russian economy from the dot-plotted balanced growth trajectory in 2H 2023 was more significant than the Bank of Russia estimated in October.

Return of inflation to the target in 2024 and its further stabilization near 4% imply a prolonged period of maintaining tight monetary conditions in the economy. CBR head Nabiullina stressed the main task for 2024 will be bringing inflation back to its target of around 4%.