Just a little while ago, the spectacular fall in the ruble was pushing inflation sky high and scaring Russians into hoarding luxury goods to protect their wealth. Then, things calmed down. But now inflation is rearing its head again.
Capital Economics pointed out in a note to clients that utilities have a big part in this—Russia’s economy minister said as much a few days ago. Still, a renewed fall in oil prices is driving down the ruble against major currencies:
That means it’ll be harder for the Russian central bank to bring down interest rates from their current highs, since it estimates in its policy statement that oil needs to reach $70 per barrel for Russia to register even 0.7% GDP growth.
Last month, the central bank said it was ”ready to continue cutting the key rate as inflation risks abate and inflation declines further,” but now it has inserted more cautious language this time. Rate decisions now depend on “the balance of inflation risks and risks of economy cooling.”