Inflation returned to the "normal" level of 0.1% w-o-w over June 19-25. This followed a brief acceleration to 0.2% due to rouble devaluation in May-June (when the Russian currency fell 9.7% against the bi-currency basket). Inflation now stands at 2.8% YTD, while the y-o-y figure has risen slightly, to 3.9% from 3.6% at end May. We expect w-o-w and y-o-y inflation to accelerate in early July, when regulated tariffs will be hiked. The effect of depreciation appears to be evaporating, while money supply growth has been moderate, which will help to contain inflation.

Russia looks more resilient to external shocks than before. A weaker rouble, if oil prices go down or capital outflow increases, helps the tradable sector perform better and secures rouble-denominated oil taxes. External debt is not high and payments are easy bearable. Russian exports are geographically well diversified, while real demand for energy remains stable.  The Central Bank has stopped targeting the nominal rouble (at least actively), the money supply has become internally derfived and the economy has not suffered a liquidity shock.