Russia: surging inflation to prompt more rate hikes

Russian inflation shows no sign of letting up and looks set to remain above the central bank’s 4% target until at least the end of next year. With households’ inflation expectations also rising, we think the central bank will feel the need to step up the pace of policy tightening. We now expect 175bp of interest rate hikes, to 7.25%, by year-end (previously 100bp, to 6.50%). That is more than most currently expect.