Friday, September 4, 2015

4/9/15: Russian Inflation: Forget CPI, Look at Bribes Pricing

On a 'light' Friday night note, a cheering report of inflation found somewhere (not in the ECB land, alas). Per Interfax report (link here) average bribe extended in Russia rose almost 3-fold to over RUB600,000 in Ruble terms. Between September 1, 2014 and August 31, 2015, according to the independent report prepared by anti-corruption organisation "Clean Hands", rose to RUB613,700 or USD9,440. A year ago, average bribe extended in  Russia stood at RUB218,400 or USD5,600.

That's USD inflation of 40.7% y/y or more than 2.5 times the rate of CPI in Russia.

Top 3 areas where bribery is rampant are: judiciary (>61% of all registered cases), police (39.3% of cases) and prosecution authorities (33.75%).

Perfect FX hedge... thus.

But in real news, inflation ticked up to 15.8% in August up on 15.6% in July. July push was down in part to new tariffs measures, which were supposed to be one-off, but now seemed to have fed into August too. That said, monthly increase was the second smallest this year and all of the inflation push up seemed to be down to Ruble poor showing - posting fourth straight month of declines against the USD. Next week CBR rate decision is now most likely going to come and go with rates remaining at 11%. Still, Ruble is trading within the Government 'comfort range' of RUB/USD65-70 (currently at around 68.495)

August inflation is a shocker less because of the level than because of the change in the momentum. This year, inflation peaked at 17% in March and was declining through June and rose again in July.

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