The MOEX Russia stock index has experienced a modest rebound, recently stabilizing around the 2800 level in early October. However, it remains perilously close to the 18-month low of 2600 recorded last month, reflecting ongoing challenges posed by persistently tight monetary conditions.
In its Stember meeting, the Bank of Russia raised the key interest rate by 100 basis points, bringing it to 19%, and indicated that another rate hike could be on the horizon in October. Concurrently, policymakers revised their inflation forecast for the year to a range of 6.5% to 7%, despite the current inflation rate standing at 9.1%.
This inflation uptick is primarily attributed to economic strains induced by heightened government military spending, which has resulted in increased wages yet strained the economy’s ability to meet soaring demand. Central Bank Governor Elvira Nabiullina has cautioned against the looming threat of stagflation, a scenario marked by continuous inflation alongside sluggish economic growth.
Year-to-date, the MOEX has declined by 311 points or 10.04% as of the beginning of 2024, based on trading data from a contract for difference (CFD) linked to this benchmark index. Analysts project the MOEX CFD will trade at approximately 2742.39 points by the quarter's end, with future estimates forecasting a drop to 2524.76 points within the next twelve months.