Russian Inflation Is Easing, But What's Next?
While Russia’s annual CPI growth fell from 16.4 percent in April to 15.8 percent in May, economic conditions in the country and the health of its currency continue to deteriorate.
The collapse in oil prices and international economic sanctions relating to the Russia’s actions in the Ukraine continue to weigh on its economy, and investors in Russian stocks and ETFs have been feeling the pain.
In just the past week alone, Market Vectors Russia ETF Trust (NYSE: RSX) and iShares MSCI Russia Capped ETF New (NYSE: ERUS) were both down more than 8 percent, while Direxion Daily Russia Bull 3X Shares ETF (NYSE: RUSL) was down a whopping 23 percent. (Editor's note: All three stocks were trending higher on Friday.)
Annual food inflation fell from 21.9 percent in April to 20.2 percent in May. Services prices growth also dropped from 11.8 percent year-over-year in April to 11.5 percent in May. Non-food price growth actually climbed from 14.1 percent year-over-year in April to 14.2 percent in May.
In a new report, HSBC analyst Artem Biryukov discussed the implications of the latest Russian data and what the market can expect from here.
“We expect this downward inflationary path to support further interest rate cuts and look for the key policy rate to hit 10% by the end of the year,” Biryukov explained. He added that the risk to both HSBC’s Russian inflation projections is to the downside.
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.