Russian consumer prices increased by 0.1% week-on-week in the week of June 24, following three weeks of zero weekly inflation in a row. Since the beginning of the month inflation stood at 0.1%, Sberbank CIB estimated on June 27. 

The bank expects month-on-month inflation in June to come to 0.1%-0.2%, below the 0.5% m/m seen in the same month of last year. This would make year-on-year inflation of 4.7%-4.8% in June, bring the inflation rate back below the 5% threshold.

At the latest policy meeting the Central Bank of Russia (CBR) overshot the expectations and lowered the inflation forecast for 2019 to 4.2%-4.7%, while reiterating the medium-term target of 4%.

Better than expected inflationary dynamics allowed the regulator to make the first key interest rate cut since March 2018, making a minimal cut of 25bp to 7.5%, as largely expected by the market.

The CBR also allowed for further rate cuts in 2019, while moving to neutral monetary-crediting policy by mid-2020. The next policy meeting is scheduled for July 26, although this is not an anchor meeting accompanied by a press-conference. 

The regulator is under pressure to cut rates to boost growth, which has been extremely weak in the first quarter. GDP growth was only 0.8% y/y in the first three months of this year, way below even the most pessimistic forecasts and the economy is stagnating.

In its latest report on Russia the International Monetary Fund (IMF) argued that the CBR should not wait too long to restart the monetary easing cycle, as currently the "monetary policy stance is estimated to be moderately tight."