Russia's monthly inflation rate likely to reach 0.6%

In Russia, the inflation rate recorded 15.6% year on year, which was 15.7% in September. The annual rate of inflation of the economy is about to enter a five-month period during which it will plummet rapidly due to base effects and RUB stability, says Barclays.

Russia inflation declined only fractionally in October to 15.6% y/y from 15.7% in September (Figure 1). 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.

"Monthly inflation is currently running at 0.8% m/m. But this level could moderate as the RUB has stabilised and is no longer exerting pass-through effects, in our estimation. The monthly rate is anticipated to decline gradually towards 0.6%", argues Barclays.

At the same time, inflation base effects are about to reach a five-month period during which inflation rate on an average was 2.25% per month 12 months ago. 

"This indicates that the inflation can be bring down by about 1.6pp per month on average. It is assumed that 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.