Russia raises interest rates (Afternoon analysis 14.09.2018)

14.09.2018 15:41|Marcin Lipka

Weaker than expected data on retail sales in the USA. The Russian Central Bank raises interest rates to 7.5%. The zloty remains stable. Before the session opening in the USA, the current euro exchange rate was 4.30-4.31 PLN.

In the afternoon, the Census Office published US retail sales data for August. The monthly reading, excluding fuels and cars, was weak, with an increase of only 0.2%, (expectations of 0.5% month-on-month). However, as Robert Kaplan, President of the Dallas Federation, also pointed out in an interview for Fox Business, that monthly data is sometimes "disturbed".

Looking at the year-on-year data, the publication does not look bad. August retail sales increased by 5.9%, excluding more volatile factors (fuels, cars). Out of the basic categories, the weakest were goods related to leisure activities (sports shops, bookshops, hobbies), which in annual terms fell by 3.9%. Apart from this category, which has been looking unsatisfactorily for a long time, consumer demand is not arousing concern, although the readings are lower than expected.

Of the events occurring in the afternoon, it is also worth noting the decision of the Central Bank of Russia (CBR). For years we have been pointing out that the approach of monetary authorities led by Elvira Nabiullina is very conservative. The central bank is also characterised by a surprisingly high degree of independence, as for the conditions in which it has to function.

This time, CBR also showed that despite relatively slow GDP growth, it is worth to be on the safe side (possible increase in inflationary pressure) and raise interest rates from 7.25 to 7.50 %, despite the market's expectations that they will remain unchanged. The statement also suggests that CBR "will consider further interest rate increases, taking into account inflation and the economic situation in relation to forecasts, as well as risks associated with the external situation and the reaction of the financial markets".

After the CBR decision, the rouble gained over 1%, but due to the afternoon increase in the US currency on the global market (the dollar supported the yields of 10-year US Treasury bonds, which climbed to the 3 % level for the first time in almost one and a half months).

No significant changes on zloty

In addition to CBR decisions and US retail sales data, industrial production from the US was also published before New York trading began. It was a mixed reading (general publication slightly above forecasts, but manufacturing below). However, it is worth noting that in the mining sector activity increased by as much as 14.1% year-on-year, which perfectly illustrates the progressing shale revolution in the USA.

The zloty remains insensitive to external signals. Also, the reading of core inflation in Poland, slightly higher than expected (0.9% vs. 0.8% year-on-year), did not make a greater impression on the zloty. The Polish currency is still omitted by speculative capital (good news), and at the same time the external stabilization of the economy (the success of 2013-2017) causes that only more serious problems on emerging markets or in the EU may threaten the wider stabilization of the zloty.


Subscribe to our currency newsletter

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

14 Sep 2018 12:45

Eurozone data (Daily analysis 14.09.2018)

13 Sep 2018 15:43

US inflation failed expectations (Afternoon analysis 13.09.2018)

13 Sep 2018 12:27

Central banks in limelight (Daily analysis 13.09.2018)

12 Sep 2018 16:09

Weak data from eurozone and US (Afternoon analysis 12.09.2018)

12 Sep 2018 13:01

Drops in eurozone production (Daily analysis 12.09.2018)

11 Sep 2018 15:28

Stable zloty (Afternoon analysis 11.09.2018)

Start chat