Russia: surging inflation to prompt more rate hikes

Russian inflation shows no sign of letting up and looks set to remain above the central bank’s 4% target until at least the end of next year. With households’ inflation expectations also rising, we think the central bank will feel the need to step up the pace of policy tightening. We now expect 175bp of interest rate hikes, to 7.25%, by year-end (previously 100bp, to 6.50%). That is more than most currently expect.
Liam Peach Emerging Markets Economist
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The further jump in Turkey’s headline inflation rate to 19.0% y/y in July is unlikely to trigger an interest rate hike but it will delay the start of an easing cycle until the back end of this year. China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.

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In view of wider interest, we are sending this Emerging Europe Economics Update to clients of the FX Markets service as well.

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