The tax hikes announced by the Russian finance ministry this week will help to plug the hole created by the growing military budget, but won’t deliver the scale of fiscal tightening needed to stop the economy from overheating. Meanwhile, the Bank of Israel’s hawkish commentary when it left interest rates on hold this week underlines the pressure policymakers are under due to high military spending and we think the door for further rate cuts this year has probably now closed. Finally, the European elections taking place next week may give insights into upcoming national elections this year, including the strength of support for the far-right in Romania.
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