Russian inflation likely to ease further in November, CBR to cut rates in December

The Russian inflation continues to ease, while the real economy has also taken a step back in recent months. Weekly price data imply that inflation is expected to slow down further in November to possibly 2.4 percent year-on-year, noted Commerzbank in a research report. This might be better than October’s 2.7 percent. The latest inflation expectation survey published by the Central Bank of Russia indicated that both adjusted and unadjusted measures of inflation expectations are falling to record lows – the adjusted 12-month forward measure had reached a low of 2.4 percent.

The latest data are likely to raise bets that the central bank will further lower rates in December and also that there might be a rise in the bets on 50 basis points as opposed to 25 basis points. But even after such rate cuts, the real interest rate in Russia might remain above 5 percent, as compared with the Russian GDP growth of around 2 percent, stated Commerzbank.

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