Macroeconomic Forecast Russia

July 2008 | Macroeconomic Forecasts

Russian consumer price growth accelerated further in May to a 65-month high of 15.1% y-o-y. Part of the problem is the monetary authorities' generally lacklustre response to spiralling prices. Thus far this year, the Central Bank of Russia (CBR) has hiked the benchmark refinancing rate by only 75bps (to 10.75%) and restricted upward appreciation of the rouble against the dollar-euro basket to under 1.0%. While we are maintaining our end-year 10.9% y-o-y inflation forecast, we caution that the latest figure does highlight upside risks. While we expect that the CBR will eventually allow for more significant rouble appreciation, the longer they delay, the more likely that inflation will remain above our forecast through the end of the year.

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