Accelerating inflation leaves no room for rate cuts but could support budget revenues

RUSSIA ECONOMICS - In Brief 13 Oct 2026 by Evgeny Gavrilenkov

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With the indexation of regulated tariffs (like communal service charges and passenger transportation) postponed until October, inflation for the month could hit around 1.5% m-o-m. In the previous years, this indexation was orchestrated in June. Rosstat noted that in the week ending October 5, inflation rose 0.96% w-o-w, with 0.90% of that coming from the first five days of the month. YTD inflation climbed to 5.94%, and it’s expected to reach about 6.5–6.6% y-o-y by month’s end. By year-end, it could surpass 7.8% and approach 8.0%, though this isn’t certain as it depends on the federal budget spending pattern in the remaining months.The recent upward spending revisions set the target at R48.5 trillion for the year, with R34.8 trillion already spent in the first nine months of 2026. This means the government needs to allocate R13.7 trln from October to December, or over R4.4 trln per month on average - well above the monthly average spending in the earlier months. Historically, such sharp increases in budgetary spending have triggered inflation, as these expenditures were often unproductive and excessive from a macroeconomic perspective. However, it’s still unclear how spending will be distributed across the remaining months. Inflation could stay moderate in November and even December if monthly outlays in October and November match the 9M26 average of below R3.9 trillion. If that’s the case, spending would surge at the end of December, likely causing inflation to accelerate sharply in January next year. Consequently, the CBR is expected to remain cautious.Federal budget spending dropped in August and September to around R3.1-3.2 trln per month, leading to monthly surplu...