CBR lowered its key interest rate by 50 basis points to 7.5%
While the central bank in Russia is trying to get back to its regular monetary policies, the latest geopolitical movements also affect the Russian Ruble.
Last Friday, September 16, the Central Bank of Russia (CBR) lowered its primary rates by 0.50% for the sixth meeting in a row to 7.5%. Earlier this year, right after the Russian attack on Ukraine, Ruble lost its value, and the central bank, in a supportive action, increased the primary rate to 20% from 9.5%. After this decision, in the statement, the central bank said that slower consumer demand and other "one-off factors" led to a slowdown in annual inflation, which helped them to return to their accommodative policies. At the same time, officials in the central bank confirmed that cost expectations for both households and businesses are still elevated.
While this rate cut eased upside pressure on the Ruble and made lending cheaper to help the economy, geopolitical decisions again can increase the costs of businesses in Russia, especially for foreign investors.
Russian President Vladimir Putin declared a partial mobilization of the country's 2-million-strong military reserve. The first step, it will include those who have already served in the armed forces and who have relevant experience and training. Later, Russian Defense Minister Sergei Shoigu said that it would only affect 300,000 people. Recently Ukrainian army has claimed to have taken back parts of their country's territory that were occupied by Russia, and this decision in Russia can be interpreted as a reaction to Ukraine's claims.
With these geopolitical changes and central bank decisions in Russia, we can expect an increase in costs of business and inflation, which will lead to a decrease in the value of the ruble in the coming months.
From the technical point of view, USDRUB created a strong support around 60. After falling under 50 on June 29 and recovering back above 20-DMA on July 5, USD Rubel always traded above 20 Daily Moving Average and it seems that can continue this slow uptrend with weaker economic outlook that we can see. Next resistances are observed at these levels: 63, 67 and the 71.
