Russia: underlying price pressures are contained

The rise in Russian inflation in late-2018 and early-2019 was driven largely by higher food prices and a VAT hike. To overcome these distortions, we’ve created a measure of ‘underlying’ inflation, which is currently in line with the central bank’s 4% target. This suggests that, as these factors fade, headline inflation will return to target, prompting more monetary loosening than is priced into markets.