Russia’s Inflation is Expected to Continue to Soften in December
Bottom Line: After edging down to 6.6% in November, we expect Russian inflation to continue its decreasing pattern in December owing to lagged impacts of previous aggressive monetary tightening and relative resilience of RUB. December inflation figures will be announced on December 29, and we foresee y/y prices to surge by around 6.3%-6.5%. Despite Central Bank of Russia (CBR) predicts annual inflation to decline to 4.0–5.0% in 2026, our 2026 average headline inflation projection stays at 6.2% due to inflationary risks.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2015 – December 2025
Source: Continuum Economics
After annual inflation edged down to 6.6% y/y in November, we expect the decreasing trend to continue in December thanks to lagged impacts of previous aggressive monetary tightening, relative resilience of RUB and decreasing core inflation. We foresee y/y prices to hike by around 6.3%-6.5% in December. (Note: December inflation figures will be announced on December 29).
According to the CBR’s forecast, annual inflation will decline to 4.0–5.0% in 2026 and underlying inflation will reach 4% in 2026 H2. Despite inflation will likely ease for the ninth straight month in December, we believe reaching 4%-5% target band will be tough in 2026, since cooling off inflation will take longer than CBR anticipates due to sanctions, adverse effects of the VAT increase (in 2026) and administered prices coupled with continued surge in military spending. Elevated inflation expectations may also impede a sustainable slowdown in inflation. (Note: Highlighting upside risks to the inflation, CBR also emphasized in its written MPC statement on December 19 despite underlying measures of current price growth declined in November, inflation expectations have edged up in recent months and lending activity remained high).
Our 2026 average headline inflation projection stays at 6.2%. We think pro-inflationary risks still prevail over disinflationary ones in the mid-term horizon. We believe a peace deal in Ukraine remains the real key to ease pressure on inflation and alleviate demand-supply imbalances in Russia.