Emerging Europe Economics

Emerging Europe Economics Focus
11 March, 2008

Russia: How to tame double-digit inflation

Russian inflation has returned with a vengeance. As a result, the Central Bank (CBR) already looks certain to miss its end-year target of 8.5%. But the response of policymakers will be dictated by developments in global markets. If capital inflows resume over the coming months, as we expect, then further currency appreciation will be the only option and we have pencilled in a 5% rise in the ruble against its dollar/euro basket this year. But if capital continues to flow out of the country then the Central Bank (CBR) may have scope to raise interest rates....

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