Headline inflation fell to 8.6% year on year in Russia in September but this was a touch less than expected and the breakdown showed that core price pressures are easing only very slowly. It now looks very likely that the central bank will raise interest rates from 19% to 20% later this month, say analysts. (chart)

“The outturn was down from 9.1% y/y in August and in line with our forecast, but above the consensus (of 8.5%). In month-on-month terms, prices rose by 0.5%. The breakdown showed that food, non-food goods and services inflation all eased last month, although the latter only dropped from 11.7% y/y to 11.6%,” said Liam Peach, the senior emerging market economist with Capital Economics.  

Rosstat’s measure of core inflation, which includes some food items, declined marginally from 8.4% y/y to 8.3%. In seasonally adjusted month-on-month terms. Capital Economics estimates that core inflation continues to run at an annualised rate of more than 8.%.

CBR Governor Nabiullina has sounded more hawkish in recent weeks and said that another interest rate hike is possible at the next meeting later this month. Inflation is now tracking slightly above the central bank’s end-2024 forecast of 6.5-7.0% and its end-2025 forecast of 4.0-4.5% is looking a bit harder to achieve, particularly in light of the recent 2025 federal budget which proposed a further 13% increase in spending next year, says Peach. “Against this backdrop, we now think that another 100bp interest rate hike to 20% is more likely than not.”