Russian inflation to fall to 11.6% by end 2015

Pass-through is diminished by weak Russian economic performance. A 10% NEER depreciation normally adds 0.5-1.0pp to headline inflation. However, the current effect might be less for two reasons. 

First, the ruble rout of Q3 15 reminds us of the one observed in Q1 15, such that the price setting has already adjusted to cheaper ruble. 

Second, private consumption remains too lacklustre to trigger price pressures. 

"On the contrary, many retailers have likely budgeted quite high exchange rates and will continue reducing margins in order to preserve turnover. That said, unless the USD/RUB breaches new highs, demand-pull factors will weaken the pass-through channel to inflation, which is 15.6% yoy as of 31 August, falling to 11.6% yoy by the end of 2015", says Societe Generale.

The CBR's communication is still found to be rather weak, and  a few steps are seen as being inconsistent with the inflation targeting framework. 

"However, the CBR's probable hawkish stance remains questionable, which is not to say unjustified. Thus, the most likely scenario for the 11 September CBR meeting is that the bank will keep the key rate flat at 11.0%", added Societe Generale.