The ruble strengthened on Friday against the dollar by 0.6% to 68.69, while during the day quotes in the USDRUB pair fell to 68.21, rewriting a new low since March 6 (almost 3 months). The Russian currency rose against its American rival for the third week in a row. Over the past 5 trading days, the ruble has strengthened by 2.11%. At the same time, for the first time since March 2016, the ruble ends each of the 3 weeks of the series with a growth of more than 2%. Rabobank's currency strategists noted yesterday that the strengthening of the ruble by June 19, when the Board of Directors of the Central Bank of the Russian Federation meets, will play an important role in making the decision. If the ruble recovers, for example, to 65 per dollar compared to 68.65 currently, the regulator will be able to lower the rate more deeply. Accordingly, relative to the current quotes, the USDRUB rate should decrease by 5.3% in 2 weeks to reach 65.00. This is quite realistic if we consider that the implied weekly volatility of the dollar / ruble exchange rate is 13.4%. The Moscow division of Goldman Sachs also supports the idea that a more expensive ruble allows you to reduce the key rate this year by more than 1%. At the same time, Citibank economists predict that the Bank of Russia may reduce the key rate to 3% in the end, Bank of America experts predict a decrease to 3%, but Deutsche Bank claims that in the current easing cycle, the lower limit is 4% per annum. According to Rosstat data released on Friday, consumer inflation slowed to 3.0% yoy in may, compared with 3.1% yoy in April. The CPI grew by 0.3% on a monthly basis. Core consumer inflation, which does not include the most volatile items, also rose by 0.3% in April and by 2.9% in may last year. Consumer inflation in Russia clearly does not intend to rise above 4%, according to Goldman Sachs, so the key rate may fall to 3.5% by December. The ruble-denominated government debt market has already priced in a rate cut of 100 bps following the June 19 meeting. According to the dynamics of the movement of the yield curve OFZ( Federal loan bonds), last week the upcoming rate cut to 4.5% was embedded in the bond prices. At a briefing on Friday, June 5, the head of the Central Bank Elvira Nabiullina said that there is a great potential for reducing the key rate, while reducing immediately by 100 bps to 4.5% per annum is also "on the table". However, she stressed that the regulator is inclined to take more gradual steps as part of reducing rates, since a sharp reduction may expose commercial banks to unnecessary risk. After these comments, OFZs were under selling pressure, and their profitability began to grow noticeably. A stronger rouble and low inflation could return the potential for a key rate cut. Russia's revenue structure still depends on exports. This is one of the important reasons why the government may not be very interested in strengthening the ruble in the current situation. Lowering rates puts pressure on the national currency, as it becomes cheaper relative to Western competitors. http://www.profinance.ru/news/2020/06/05/by31-zapadnye-banki-predpolagayut-chto-ukreplenie-rublya-stimuliruet-tsb-snizit-klyuc.html