- Bank of Russia holds benchmark rate at 10.5%, citing inflation
- Currency is second-worst performer in emerging markets in July
The ruble had its steepest weekly decline since January after a decision by Russian policy makers to leave rates unchanged failed to bolster the currency as crude poised to enter a bear market.
The currency of the world’s biggest energy exporter kept declines after the Bank of Russia left its key rate unchanged at 10.5 percent. It traded 0.3 percent weaker against the dollar at 66.795 by 4:55 p.m. in Moscow, set for a 2.9 percent decline this week and the biggest monthly loss since December. Brent crude fell 1.8 percent to $41.92 a barrel in London amid a global inventory glut, on track for a 16 percent plunge in July.
The second-steepest drop among emerging-market currencies in July is putting pressure on the Bank of Russia’s goal of almost halving inflation by next year. The decision to leave the benchmark at 10.5 percent was predicted by 29 of 39 economists in a Bloomberg survey. At the same time, the central bank signaled it may resume its easing cycle if consumer-price growth meets “the forecast trajectory.”
“It’s been clear for a while what they will do, so no change has been priced in," said Vladimir Miklashevsky, chief strategist at Danske Bank A/S in Helsinki.
The Micex index of stocks sank 0.3 percent to 1,948. Russian bonds retreated, with yields on 10-year debt falling five basis point to 8.53 percent. The ruble’s losses have diminished wagers on rate reductions, leaving the 10-year debt trading 197 points below the central bank’s key rate. That compares with a low of 239 points on June 10, the day of the previous central bank’s meeting.
Bond investors in Russia need "steel nerves,” according to Ivan Guminov, a manager of bond portfolios at Ronin Trust in Moscow. “Oil can ruin any strategy.”