Bank of Russia decision in October?

The first ten days of October saw the largest price jump since the January VAT increase. In November, consumer inflation will be pressured by indexed housing and utilities tariffs. By the end of the year, the official inflation rate, according to the most optimistic forecasts, will be around 7.1–7.2%. However, the public's perception of inflation is 13–15%, with prices in the food sector rising significantly. This is having a more severe impact on poor and middle-income Russians. According to Rosstat data published on October 7, prices rose by 0.96%. This is a lot, but indexation of housing and communal services tariffs made a significant contribution to the growth. The government is targeting a total utility bill increase of approximately 9.9%, but the actual increase in water disposal and other tariffs turned out to be 1.2-1.7 times higher than this target. According to FOM, respondents believe that the most noticeable price increases are in the housing and communal services sector (35%), gasoline (45%), and meat and poultry (46%). In the non-food segment, steady growth has been observed in most indicators in recent weeks. Sociologists surveyed by Nezygar speak of a dual picture: on the one hand, society has mentally become accustomed to autumn price increases, on the other hand, the safety margin this year is noticeably smaller than last year and the year before. In this regard, the perception of price increases will be somewhat more acute. Judging by the current rate, monthly inflation in October will amount to 1.1–1.4%. In reality, this means a significant increase in the perception of inflation in society, which, against the backdrop of an actual decline in income for the majority, increases both anxiety and discontent. Society has developed adaptation mechanisms: reduced consumption and a decrease in the frequency of spontaneous purchases. Most importantly, a willingness to consume lower-quality foodstuffs. November will be the most sensitive month in terms of consumption: the onset of winter and increased utility bills will ensure an acceleration of inflation against the backdrop of the fuel crisis. In December, the rate of inflation is unlikely to slow for consumer reasons: the last month of the year is traditionally the most active, like August, in terms of consumption. Under these conditions, it is worth predicting price increases primarily in the non-food segment, although food consumption also increases before the New Year holidays.

Deputy Governor of the Central Bank of Russia Zabotkin launched yet another information canard, stating that the rate of growth of the Russian economy in the third quarter is accelerating compared to the first half of 2026. Therefore, the Central Bank expects that in the future, indicators will gradually increase as production capacity expands and productivity rises. These statements are a typical example of manipulative propaganda. Comparing successive periods of time—quarter to quarter, or, especially, quarter to half-year—to assess the state of the economy is incorrect. Around the world, agencies responsible for economic planning compare indicators year on year, obtaining an objective assessment. So, GDP growth in the third quarter of 2025 amounted to 0.6% (here and below—Rosstat estimates), exactly the same as the forecast for the third quarter of 2026. The growth rate is zero, which means there are fundamental problems in the economy. A similar proportion is obtained when comparing the third quarter of 2026 with the first half of 2026, as Zabotkin does. In both cases, it is the same 0.6%. This is despite the fact that in the first quarter, a decline of 0.2% was recorded, which smoothed out growth of 1.8% in the second quarter. If we compare the second and third quarters of 2026 using Zabotkin's formula, we get a decrease in GDP of 1.2%. The conclusion is obvious: there is no "accelerated growth". At best, there is no decline, and then due to the government's budgetary impulses and the growth of trade turnover. The meaning of this signal from the Central Bank is clear: society and the elite are being made to understand that the high key rate does not hinder economic development in any way, therefore, reducing it at the meeting of the Central Bank's board of directors on October 23 is inappropriate. Given that inflation is reaching 1% per week, the Ministry of Finance's borrowing on the OFZ market is increasing, and budget expenditures are rising, the regulator has every reason to once again launch a key rate rally in line with its recently adjusted forecast. It can be assumed that the key rate will be raised by no less than 0.25%.

Deputy Governor of the Central Bank of Russia Zabotkin launched yet another information canard, stating that the rate of growth of the Russian economy in the third quarter is accelerating compared to the first half of 2026. Therefore, the Central Bank expects that in the future, indicators will gradually increase as production capacity expands and productivity rises. These statements are a typical example of manipulative propaganda. Comparing successive periods of time—quarter to quarter, or, especially, quarter to half-year—to assess the state of the economy is incorrect. Around the world, agencies responsible for economic planning compare indicators year on year, obtaining an objective assessment. So, GDP growth in the third quarter of 2025 amounted to 0.6% (here and below—Rosstat estimates), exactly the same as the forecast for the third quarter of 2026. The growth rate is zero, which means there are fundamental problems in the economy. A similar proportion is obtained when comparing the third quarter of 2026 with the first half of 2026, as Zabotkin does. In both cases, it is the same 0.6%. This is despite the fact that in the first quarter, a decline of 0.2% was recorded, which smoothed out growth of 1.8% in the second quarter. If we compare the second and third quarters of 2026 using Zabotkin's formula, we get a decrease in GDP of 1.2%. The conclusion is obvious: there is no "accelerated growth". At best, there is no decline, and then due to the government's budgetary impulses and the growth of trade turnover. The meaning of this signal from the Central Bank is clear: society and the elite are being made to understand that the high key rate does not hinder economic development in any way, therefore, reducing it at the meeting of the Central Bank's board of directors on October 23 is inappropriate. Given that inflation is reaching 1% per week, the Ministry of Finance's borrowing on the OFZ market is increasing, and budget expenditures are rising, the regulator has every reason to once again launch a key rate rally in line with its recently adjusted forecast. It can be assumed that the key rate will be raised by no less than 0.25%.

URGENT Change in the rate trajectory in October due to the budget is unlikely - Deputy Chairman of the Central Bank

A CHANGE IN THE RATE TRAJECTORY DUE TO THE BUDGET FACTOR IN OCTOBER IS UNLIKELY - ZABOTKIN

The Central Bank is preparing a justification for raising the key rate at the next board meeting. Nabiullina's advisor, Tremasov, stated that the annual inflation rate of 6-7% (the regulator adjusted it again in August from the previous 4.5-5.5%) will be exceeded by a solid 0.7%. Thus, the initial target of 4% (which the head of the Central Bank promised the President of the Russian Federation to definitely achieve) will be exceeded twofold. Tremasov prudently attributed the chronic failure of the Central Bank's promises to the increase in housing and utility tariffs effective October 1. To some extent, this explanation is correct, since private ownership of organizations providing housing and utility services is, by definition, focused on maximizing profits by any means necessary. The oligarchs who control the housing and utilities sector (Fridman, Vekselberg, Rotenberg, and others) guarantee profits by setting arbitrary tariffs, since housing and utilities are considered vital services, which fall under the state's social obligations. However, an equally powerful factor in rising tariffs is the built-in costs of servicing bank loans, which are mandatory due to the seasonal nature of housing and utilities organizations. These costs account for up to 10-15% of total housing and utilities costs, estimated at 10-12 trillion rubles in 2025. Tremasov, according to a well-known saying, approached the Central Bank while investigating and justifying the causes of rising inflation.