Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 18 Dec 2025 by Evgeny Gavrilenkov

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The Russian FX market has seen moderate volatility over the past two weeks. The CBR’s decision to lift limits on outgoing hard currency transfers by individuals from Russia and “friendly” countries has had little effect on the exchange rate. Still, easing capital controls could help the ruble weaken toward more economically justified levels. Meanwhile, Urals oil discounts have widened to over $20 per barrel, signaling lower export revenue inflows to the FX market in the coming months. While some of this shortfall might be offset by extra hard currency sales from the National Wealth Fund, overall FX supply is likely to shrink in early 2026, potentially putting further pressure on the ruble. With inflation staying low, investors are confident the CBR will cut the key rate this Friday. The market is even betting on a 100 bps cut, up from the previous 50 bps move. Many see the easing cycle lasting into 2026, with the key rate dropping to 12% by the end of next year. This optimism has fueled demand for OFZs, pushing the 10-year yield near 14%, and it could dip lower if the CBR sends a positive signal. It’s still uncertain whether the regulator will play it safe with a 50 bps cut or go for the full 100 bps, but there’s a good chance yields will keep tightening next year either way. It appeared not too typical to see December inflation that low as it was seen recently. In the seven days ending on December 15, inflation w-o-w remained at 0.05% as was in the previous seven day period. Despite the year-end budgetary spending spree the MTD inflation climbed just to 0.11% and with the YTD tally at 5.37% inflation in 2025 as a whole could be just above 5.5%. Note, that the key rate...