The rise in Russian inflation to 2.5% y/y in March probably marks the start of a gradual pick-up over the next few months as the effects of the weaker ruble feed through to consumer prices. But with inflation unlikely to rise too far above the central bank’s 4% inflation target and signs that the ruble is stabilising, this should leave the door open for the central bank to cut interest rates further. We expect a 50bp interest rate cut to 5.50% at the central bank’s meeting on 24th April and a further 50bp by year-end.
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