Heading for inflation: why a strong ruble doesn't hinder price growth
During trading on October 16 on the over-the—counter market, the dollar exchange rate at some point dropped below 77 rubles, the lowest since the spring of 2023. The yuan, in turn, dropped below 11 rubles. Despite the ruble's high exchange rate in recent years, we have seen an acceleration in inflation again in recent weeks. The experts interviewed by Izvestia told what the reasons for this paradox are, and also estimated the inflation rate if the ruble exchange rate falls below 100 per dollar, as some representatives of business circles want.
It's too expensive
Despite all the predictions and calculations of the "fair" ruble exchange rate, the Russian currency continues to be relatively expensive. Although its one-time increase to 77 per dollar impressed many, it was hardly a surprising development. Due to the peculiarities of foreign trade settlements, the demand for foreign currency is lower now than in the past, especially for the dollar. The yuan, which is weak compared to the ruble, also looks logical.
What at first glance is not at all logical is the situation within the Russian economy. After a sharp slowdown in August, inflation began to run up again in the fall. In the last week, the price increase was 0.23%, the week before that — 0.21%. If you try on these figures for a whole year, you might get something like 10%, which is much higher than the target of the Central Bank and in general a serious cause for concern. It's clear that this won't happen every week, but the numbers speak for themselves.
This looks strange in a situation where most of the products consumed are still imported, especially industrial consumer goods, as well as parts for machinery. Let's add to this that the inflation of the dollar is now much lower than the ruble (no more than 3%), and the yuan periodically falls into deflation altogether: in China, the largest producer of consumer goods in the world, prices are chronically not rising. But this has practically no effect on price growth in Russia. What is the problem?
Tariffs, gasoline, VAT
Vladimir Tsibanov, Deputy General Director of AAA Capital Management Management Company, notes that although the strong ruble restrains import prices, it is unable to compensate for the increase in prices for individual goods.
"The current weekly data reflect a significant increase in prices due to non—monetary and administrative factors: rising gasoline prices, rising car prices amid news about recycling, and so on," the expert notes.
According to Olga Belenkaya, head of the Macroeconomic analysis department at FG Finam, the effect of the exchange rate has already affected inflation.
"The main strengthening of the ruble this year occurred in the first half of 2025, and then it was a significant factor in reducing inflation, primarily through the prices of imported goods," she notes. — In July and August, the exchange rate stabilized, and in September it even weakened: against the dollar by 3.2%, against the yuan by 2.9%. Accordingly, the effect of the strengthening of the ruble in recent months has practically ceased to affect inflation. The new round of strengthening of the ruble, which we are witnessing now, has been going on for too short a time to have time to influence the price increase. If it continues, its impact may become more noticeable.
She added that at the same time, more significant factors are now affecting the acceleration of inflation: rising prices for gasoline, fruit and vegetable products, and some other types of food and services. The upcoming VAT increase and potential changes in recycling parameters may also contribute to price increases in the coming months.
As Natalia Pyrieva, a leading analyst at Cifra Broker, noted, there are several reasons for the surge in inflation, and they are more than enough to cancel out the positive effects of the exchange rate.
"Firstly, there is a long—awaited clarification of the budget situation, and it is by no means in favor of the policy of the Bank of Russia," she emphasizes. — The deficit has once again been revised towards an even greater increase. This means that the pro-inflationary risk from the budget remains. The expected increase in VAT and other taxes is also becoming an additional pro—inflationary risk - inflation expectations may jump as early as 2025.
At the same time, the expert notes that, despite the current surge in pro-inflationary risks in the eyes of the Bank of Russia, the financial stability of businesses at current rates is excessively deteriorating, creating high risks for the system, therefore, in one form or another, the key rate will continue to move down.
According to Alexander Abramov, head of the Laboratory for the Analysis of Institutions and Financial markets at the Presidential Academy, price increases from Russian manufacturers often do not depend on the exchange rate.
"This is due, for example, to higher fuel prices caused by internal market deficits that are not directly related to the exchange rate," he explains. — This concerns the increase in tariffs for housing and communal services, tariffs for transport services, tariffs for many other types of services.
He added that now the possibilities of importing to Russia are limited both for purchasing organizations due to the lack of foreign exchange earnings that enter the country, and for the population due to the fact that under current conditions it is difficult for citizens to purchase imported goods directly through marketplaces or through foreign stores, paying in currency for purchases.
According to Abramov, Russia could increase its purchases in China, despite various logistical problems.
"However, it is necessary to take into account the negative consequences of such actions, because the arrival of cheap imports will destroy the domestic producer," he admits.
Yulia Khandoshko, CEO of the European broker Mind Money, is confident that inflation is rising for one simple reason. Now Russians are worried about a possible VAT increase, and this creates inflationary expectations.
— Of course, a 2% increase in VAT will not lead to an increase in inflation by the same 2%. But it would be strange if, against the background of softening the tax burden and increasing the tax burden, inflation did not rise at all. When food prices rise at least because of VAT changes, even if unevenly by category, it still adds inflationary pressure," the expert notes.
The important thing is not the course, but its jumps.
The strong exchange rate is now worrying many: These are not only additional budget problems, but also damage to Russian exporters, whose revenue is in foreign currency and costs are in rubles. Recently, businessman Oleg Deripaska once again called for a reduction in the refinancing rate and a weakening of the ruble to 105 rubles per dollar for the flourishing of national production. Such devaluations have actually happened more than once in the past. How could such a development affect inflation?
— According to our estimates, a 10% weakening of the ruble increases inflation by about 1 percentage point over a three—month horizon, - says Vladimir Tsibanov. — Thus, such a significant devaluation would reverse the current disinflationary trend and return inflation to double-digit levels.
According to Belenka, we observed a similar case with a rate above 100 rubles per dollar at the end of 2024, which became one of the factors accelerating inflation and raising inflation expectations.
— In general, the absolute value of the exchange rate is not so important for the economy (the Central Bank insists that it should be formed on the basis of market factors, which allows the economy to better adapt to shocks), as the absence of sharp fluctuations. It is the sharp weakening of the ruble that is dangerous from the point of view of influencing the inflationary expectations of the population and businesses and thus their behavior, which can lead to a crisis," the Izvestia interlocutor notes.
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