Russia's inflation likely to fall due to base effects

Russia inflation increased in July to 15.6% y/y as a result of government hikes in utility prices. Base effects suggest that inflation should decline in Q4 15 and Q1 16 particularly, says Barclays.

Recent RUB volatility, if sustained, could offset this trend somewhat; however, it is unlikely that RUB depreciation could completely cancel out the downward momentum. Thus, further rate cuts by the CBR are likely, even if the timing of the recent cut appeared ill-advised, adds Barclays. The RUB has depreciated in line with declining global oil prices; therefore, the RUB price of oil has actually fallen this year.