Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 29 Oct 2026 by Evgeny Gavrilenkov

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The CBR’s decision to keep interest rates steady - while upping its forecast for the average key rate in 2027 by 150 basis point - did little to lift market spirits. The regulator sees pro-inflationary forces as dominant right now, leaving almost no chance for easing monetary policy through the rest of 2026. Still, stock and bond prices have risen over the past two weeks. Many investors remain optimistic that peace talks on Ukraine could restart, potentially boosting the value of Russian assets. In our view, the odds of this happening have gone up, though they’re still moderate. In the FX market, the USD/RUB climbed again to the 80 mark, driven by high oil prices and renewed hopes for peace progress. Interestingly, even increased foreign currency purchases by the Minfin under the budget rule didn’t stop the ruble from gaining strength. We think external factors will mostly shape the exchange rate in the months ahead. Meanwhile, the planned cut in the oil “cutoff price” under the fiscal rule - from $59 to $50 per barrel starting January 1, 2027 - sets the stage for a possible ruble weakening in the medium term. Over the week ending October 26, inflation stayed low at 0.08% w-o-w. MTD inflation rose to 1.14%, mainly driven by the indexation of regulated tariffs earlier in the month. YTD inflation reached 6.24%, which remains well above the CBR target. With the upcoming budget spending surge in November and December, it’s clear why the CBR is likely to proceed with caution.