(Bloomberg) -- The latest data on Russian inflation are sending up warning signals that the first few months of 2019 could be even more hazardous than most economists had predicted.
The latest weekly numbers indicate that Russia might end up starting next year with price growth around the central bank’s worst-case forecast of 4.2 percent, according to economists at ING Groep (AS:INGA) NV. That would be the highest level in 18 months and could exacerbate the impact from a value-added tax increase next month that’s expected to cause a spike in inflation.
It could also help explain why the central bank surprised economists with an interest rate hike earlier this month.
“The inflation trajectory of the past few weeks has been a lot worse than expected,” said Dmitry Dolgin, an economist at ING. “Everyone’s attention in the next few months will be on inflation and what the government and central bank will do to cool growth expectations.”
The central bank raised interest rates by a quarter percent earlier this month as a preemptive measure against the coming headwinds. A ruble slide this week could add to the pressure, as well as plans for the regulator to resume foreign-currency purchases from mid-January.
