Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 25 Sep 2025 by Evgeny Gavrilenkov
The fixed income market reacted negatively to CBR officials' comments following the decision to lower the key rate from 18% to 17% on September 12. Monetary authorities have highlighted fiscal policy risks and indicated a more cautious stance on further rate cuts. Consequently, long-term OFZ yields rose, nearing 15%. The pressure on the yield curve is likely to persist, especially as the 2025 issuance plan grew by R2.2 trillion, from the original R4.8 trillion. Geopolitical tensions have heavily impacted the equity market. The FX market was also affected. Considering the CBR's messaging, there’s little reason for investors to feel optimistic. We anticipate the exchange rate to approach R/$85 in the coming weeks, which would represent a healthy correction, though equities are expected to decline. This raises concerns about the feasibility of the government’s plan to launch IPOs for several state-owned companies. In the seven days ending September 22, w-o-w inflation stood at 0.08%. MTD and YTD inflation rose to 0.21% and 4.16%, respectively. September's m-o-m inflation could be around 0.3%, which would lower y-o-y inflation, as it was 0.48% m-o-m in September 2024. Although inflation is expected to steadily decline in the coming months (currently hovering around 8% y-o-y), the government's growing borrowing appetite has kept the Central Bank cautious.

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