What next for Russia?

Last night’s emergency interest rate hike in Russia has raised more questions that it has provided answers. Part of the renewed pressure on the ruble today stems from oil prices, which have fallen again this morning. But more fundamental concerns are building over the outlook for Russia’s economy and the likely policy response. In order to provide a guide to clients as to what might happen next, in this Update we sketch out three scenarios, together with possible triggers and likely implications for Russia’s economy and financial markets. The key point that emerges is that there are no benign outcomes. Even if the ruble does stabilise over the coming weeks, the economic crisis facing Russia has much further to run.