Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 17 Sep 2026 by Evgeny Gavrilenkov

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A new round of escalation in the Middle East pushed up oil prices, Urals went above $105 per barrel, the first time since May. The latter had helped the USD/RUB to stabilize within the USD/RUB84-85 range. Given the high level of oil price, we expect the overall amount of purchasing of currency by the Finance Ministry due to fiscal rule to increase in October, which may result in further weakening of the ruble. On top of that, continuous capital outflow can also support the trend. However, given an overall uncertainty in geopolitical developments we expect the USD/RUB volatility to be high in the next few weeks. The CBR kept the key rate unchanged last Friday, pausing the “cut cycle” that began in June 2025. The regulator also shifted to a more hawkish tone, leading investors to believe the pause could last until year-end, pushing OFZ yields higher. Meanwhile, Minfin continued issuing fixed-rate bonds at a premium to the secondary market. As a result, long-term OFZ yields nearly hit 16.5%. With demand for government bonds still limited and new issuance expected in the coming weeks, rates could climb further. The big question now is how much government borrowing might increase in the upcoming 2026 budget revisions. We estimate an extra R1.0–1.5 trln may be needed, likely prompting the government to issue more floating-rate papers. Even though inflation is still moderate, the CBR will likely stay cautious amid expectations of rising inflation from increased government spending. So far, inflation has remained under control, and after a 0.08% m-o-m deflation in August, consumer prices in the week ending September 14 rose by 0.02% w-o-w, pushing MTD and YTD inflation to 0.07...