A Forecast on Russian Policy Rate, Inflation

From Wells Fargo today:

Source: Wells Fargo, March 1, 2022. Inflation is year-on-year. 

From Wells Fargo (McKenna/Kennenbroek),absent a full fledged financial crisis and sovereign default:

we believe Russia’s economy will fall into recession this year, and could follow a pattern similar to the way it behaved during 2014-2016 when sanctions tied to the invasion of Crimea were imposed and oil prices crashed. On the inflation side, CPI in Russia is already elevated with January inflation data indicating prices grew close to 9% year-over-year. In 2015, a collapse in the ruble sent inflation up to 17% year-over-year. In our view, inflation could spike above 2015 levels this year. The quick depreciation of the ruble, coupled with already broad based local price pressures before the conflict, should mean Russian inflation can reach 18.5% year-over-year by the end of 2022. Tight monetary policy and a stable ruble should place Russia’s CPI on a downward trajectory over the course of 2023, and converge toward the CBR’s 4% target in 2024. In our view, CBR policy rates will remain at 20% for the next few quarters, and only until inflation has peaked will CBR policymakers begin to lower interest rates. In that sense, we look for policy rates to be lowered at the CBR’s October 2022 meeting and continue to be cut over the course of 2023 and into 2024 as inflation softens

Update, 2pm Pacific:

The above forecast based upon “no default”. A big if.

19 thoughts on “A Forecast on Russian Policy Rate, Inflation

      1. Steven Kopits

        Well, in the short run it’s a suppression. If the sanctions were lifted, the Russian economy would bounce back quickly. However, I don’t think the sanctions will be lifted for a long time, and therefore I expect a recession, deep, swift and lasting.

  1. pgl

    Kevin Drum is on a roll with posts on:

    (1) How Nikki Haley is a total moron on the energy independence; (2) the past Republican history of courting Putin over Ukraine; and (3) whether sanctions generally work or not.

    But this post is even more interesting:


    Brent oil prices are up but the price received by Russia for their oil is down! Of course India has decided to take advantage of the latter.

    1. pgl

      Further down in this story is how China is following India’s unfortunate lead:

      ‘China has scooped up more Urals, which normally are mostly sold on European markets. Two large tankers, including one chartered by China Petroleum & Chemical Corp. SNP -1.04% , or Sinopec, are en route to the Chinese ports of Ningbo and Zhanjiang and are scheduled to arrive in late March, said Kevin Wright, lead oil analyst at market-intelligence firm Kpler. A Sinopec spokesperson didn’t immediately respond to requests for comment. Still, traders said China hasn’t vacuumed up cheap barrels in the way it did when global oil prices crashed at the start of the pandemic.’

      1. Moses Herzog

        From my chair/vantage point if India can take advantage of this it would be great. As I’ve discussed on this blog enough times to make people lose their breakfast, I have tremendous mixed feelings about China. I don’t want to “common man” in China to suffer. But I’d almost pay that much to watch their high-ranking government officials suffer~~~See India catch these opportunities at China’s cost.

  2. ltr


    February 28, 2022

    Climate Change Is Harming the Planet Faster Than We Can Adapt, U.N. Warns
    Countries aren’t doing nearly enough to protect against the disasters to come as the planet keeps heating up, a major new scientific report concludes.
    By Brad Plumer and Raymond Zhong

    The dangers of climate change are mounting so rapidly that they could soon overwhelm the ability of both nature and humanity to adapt unless greenhouse gas emissions are quickly reduced, according to a major new scientific report * released on Monday.

    The report by the Intergovernmental Panel on Climate Change, a body of experts convened by the United Nations, is the most detailed look yet at the threats posed by global warming. It concludes that nations aren’t doing nearly enough to protect cities, farms and coastlines from the hazards that climate change has unleashed so far, such as record droughts and rising seas, let alone from the even greater disasters in store as the planet continues to warm.

    Written by 270 researchers from 67 countries, the report is “an atlas of human suffering and a damning indictment of failed climate leadership,” said António Guterres, the United Nations secretary general. “With fact upon fact, this report reveals how people and the planet are getting clobbered by climate change.”

    The perils are already visible across the globe, the report said. In 2019, storms, floods and other extreme weather events displaced more than 13 million people across Asia and Africa. Rising heat and drought are killing crops and trees, putting millions worldwide at increased risk of hunger and malnutrition, while mosquitoes carrying diseases like malaria and dengue are spreading into new areas. Roughly half the world’s population currently faces severe water scarcity at least part of the year.

    Few nations are escaping unscathed. Blistering heat waves made worse by global warming have killed hundreds of people in the United States and Canada, ferocious floods have devastated Germany and China, and wildfires have raged out of control in Australia and Siberia.

    “One of the most striking conclusions in our report is that we’re seeing adverse impacts that are much more widespread and much more negative than expected,” said Camille Parmesan, an ecologist at the University of Texas, Austin, and one of the researchers who prepared the report.

    * https://www.ipcc.ch/report/ar6/wg2/

    1. ltr


      March 1, 2022

      These Climate Scientists Are Fed Up and Ready to Go on Strike
      Evidence on global warming is piling up. Nations aren’t acting. Some researchers are asking what difference more reports will make.
      By Raymond Zhong

      Sometimes, Bruce C. Glavovic feels so proud to be an environmental scientist, studying coastal planning and teaching future researchers, that it moves him to tears.

      Other times, he wonders whether any of it has been enough. Scientists have proved beyond doubt that climate change is transforming the planet for the worse. Yet their work has mostly failed to spur governments to address the issue. When all the signs are telling scientists that their research is not being heard, it is tragic, Dr. Glavovic said, that they just keep producing more of it.

      “We’ve had 26 Conference of the Parties meetings, for heaven’s sake,” he said, referring to the United Nations global warming summits. More scientific reports, another set of charts. “I mean, seriously, what difference is that going to make?”

      It was this frustration that led Dr. Glavovic, 61, a professor at Massey University in New Zealand, and two colleagues to send a jolt recently through the normally cautious, rarefied world of environmental research. In an academic journal, they called on climate scientists to stage a mass walkout, to stop their research until nations take action on global warming….

    1. Anonymous

      seems nato statements are not playing well in the third/developing not white world:

      “1. BBC “It’s very emotional for me because I see European people with blue eyes and blonde hair being killed” – Ukraine’s Deputy Chief …”

      “kiev isn’t baghdada”

      the source had a long list…..

      also not playing well in israel who remember vividly the babi yar ravine operated from july 1941 until the red army occupied it….. why you do not here what israel are refusing to provide!

      and watch how much us gives to iran…. for a nuclear deal when the whole show in east europe says: ‘nukes matter’!

      and soros says ukraine is a democracy!

      1. Ivan Ruskovich

        Thanks you for the update Comrade! Very good information providing you are. Are you listening my fellow Amerikans?

      2. Macroduck

        Oooooo, Sonos! Scary!

        If Soros likes Ukraine, we’d better abandon it to the Russians, right?

      3. Barkley Rosser


        Yet again you are falling on your face when you comment about almost anything that is not the oil industry.

        What is supposed to be going on about Israel and Babi Yar? Are you aware that it is the Russians who have bombed Babi Yar? You make it look like they should be upset with NATO. Do not think so. As it is, I have read Israel thinks it might play a mediator between Russia and Ukraine, having people from both places in it and having had at least up until now good relations with both.

        Then we have your bizarre comment about Iran. I see this sort of nonsense on Fox News also. Do you understand that getting back into the deal with Iran pulls it back from getting nuclear weapons whereas since Trump pulled out of the deal it has gotten closer to having them than it ever has? Also, making a deal with them and ending sanctions would increase oil on global markets and ease some of the pressure on that.

        And Soros happens to be right that Ukraine is a democracy. I hope you understand that bloviating about Soros is a sign of anti-Semitism.

    2. Ivan

      This has been a complete humiliation of Russian military. They were supposed to be able to take the whole country in 4 days and have yet to take just 1 major city.

  3. rsm

    Why shouldn’t Russia go full Turkey and index ruble deposits to neutralize nominal inflation?

    1. pgl

      Your comments are always really stupid but this one really took the cake. Could you find another blog to infest?

Comments are closed.