Russia’s Inflation stable before the fall

Russia inflation declined modestly in October to 15.6% y/y from 15.7% in September. This was in line with expectations.

"We predict that the annual rate of inflation is about to enter a five-month period during which it will plummet rapidly due to base effects and RUB stability", says Barclays.

Monthly inflation is trending at 0.8% m/m. But this range could moderate as the RUB has stabilised and is no longer exerting pass-through effects, economist estimate monthly rate to inch dowards towards 0.6%.

At the same time, inflation base effects are about to enter a five-month period during which inflation averaged 2.25% per month 12 months ago. This means that the inflation could drop by about 1.6pp per month on average.

"We think this will usher in a rate cut cycle with the 11% key rate declining to 8.5% during the next three quarters. The main risk is that RUB volatility causes a new round of inflation pass-through to unhinge", added Barclays.