Inflation for the last week from November 19 to 25 remained at high levels of the previous week and amounted to 0.36% year-on-year. Annual inflation, according to the Ministry of Economic Development, accelerated to 8.8% year-on-year. Food remains the leader in growth, followed by services. The situation with prices for non-food goods is the most stable, but the current weakening of the ruble will add pressure on prices for these goods, as the share of imports in this category is higher.
The volatility of the ruble remains elevated, which is why regulators have already taken support measures, as we expected. However, the situation remains poorly predictable against the backdrop of market adjustments to new sanctions and the emergence of speculative motives. We see a high undervaluation of the ruble and expect its strengthening to 99-105 rub/dollar and 13.7-14.5 rub/yuan by the end of the year. If a rapid rebound in the exchange rate does not occur, then the weakening of the national currency, according to our estimates, could add an additional 1-1.2 percentage points to inflation over a three-month horizon.
So what?
We maintain our GDP growth forecast for Russia in 2024 at 4% year-on-year. At the same time, inflation considering the recent weakening of the ruble is already moving towards a level above 9% year-on-year by the end of 2024 and to 9.5-10% year-on-year in the first quarter of 2025 (taking into account the low base effect). This adds arguments in favor of raising the key rate by the Bank of Russia to 23% in December and will support the regulator's tough rhetoric in the coming months.