Inflation in Russia peaked in early 2015 at levels above 16% and remained stubbornly high until late 2015. Initial developments this year did not bode well for Russian inflation. The large declines in the oil price led to significant RUB weakness, which increased the risk of FX pass through inflation once again.
CBR expect CPI prints would likely decline in early 2016 and that inflation will come in below a 6% average for 2016. However, significant decline in the oil price any further indexation of pensions and wages pose main risks to the scenario.
That said, CEEMEA inflation prints are broadly declining and with developed market inflation and inflation expectations being low, Russian inflation expectations are unlikely to be immune from broader trends.
“We think that by 2017 inflation will decline further towards 7%, so this gives CBR ample room to cut rates aggressively in 2017.” said Commerzbank in a report.
The material has been provided by InstaForex Company – www.instaforex.com