Russia Macro Monthly September 2018

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2019 downgrades … Both the Economy Ministry and the Central Bank have cut their GDP forecasts and raised inflation expectations for 2019. But both see the dip as temporary and expect a much better performance from 2020.

… but 2018 growth picture looks marginally better. Both PMI indicators rebounded in August, as did the government’s index of leading indicators for GDP. 2Q18 GDP was reported at 1.9%.

Rate policy reversal. The Central Bank raised the key rate for the first time since December 2014. It added 25 bps, to bring the rate to 7.50%, on 14 September, citing inflation fears as the main reason (comments in Appendix 6 and 7). Opinion polls show that inflation is the number one public fear, so it is no surprise that the CBR has to be seen to be taking action to try and manage the inflation threat.