Page 45 - RusRPTNov23

but today’s inflation release will have added to its concerns. Russia’s economy is overheating and inflation is likely to exceed the central bank’s end-year forecast of 6.0-7.0% y/y by a fair margin. We think it will rise above 8.0% y/y in Q1 next year. Against this backdrop, we think that further interest rate hikes lie in store, with another 100bp at the central bank’s next meeting in two weeks’ time.
The CBR published an InFOM report on population surveys. Expected inflation over the 12-month horizon decreased for the first time since June – by 0.5 percentage points. up to 11.2%. Note that the survey was conducted from October 2 to October 12, that is, before the ruble strengthened over the last two weeks. The index of large purchases, reflecting consumer sentiment, has been declining for the second month in a row, reflecting, among other things, the increase in the key rate implemented in July-September and rising prices.
The economy ministry raised its 2023 inflation forecast to 7.5% in September from the 5.3% forecast published in April, and also raised its 2024 forecast to 4.5% from 4.0%, according to economy ministry documents, which have been submitted to government as a draft forecast.
The new inflation forecast implies that Russia will only reach the central bank's inflation target of 4% in 2025 rather than in 2024, as planned by the bank. The central bank in July saw 2023 inflation in the range of 5.0%-6.5%, reducing to 4% in 2024, however bank officials last week cautioned that price rises required decisive monetary policy measures and put at risk the inflation target.
45 RUSSIA Country Report November 2023 www.intellinews.com