The Central Bank of Russia has raised interest rates more than expected to curb rising inflation.

The Russian ruble has strengthened to approximately 92 rubles per US dollar due to strong support from rising oil prices, which constitute a significant source of income for Russia. Additionally, the BRICS group remains a crucial trading partner, with increased imports from countries like China. However, the ruble's trend can also weaken further due to ongoing conflicts without clear prospects for resolution.

The Central Bank of Russia (CBR) has increased interest rates by another 200 basis points to 15% in its recent meeting, which is double the market's expectations. The CBR signaled that this rate hike will continue to combat the persistently rising inflation rate. Furthermore, there are predictions that the inflation rate may exceed 7% within the year 2023. The rate hike is due to high credit growth and rapid expansion of retail lending, contributing to the rising inflation.

Russia's unemployment rate is at its lowest level, at 3% in September, with an increase of 47,000 unemployed individuals from the previous month, totaling 2.315 million people. This is attributed to military conscription, causing a labor shortage and impacting production capacity. It has also led to imbalances between increased demand for goods and services and reduced production.

The Russian economy expanded by 5.2% YoY in September, driven by increased military spending, pension and salary increases, leading to higher demand for various goods and services.

Russia's Manufacturing PMI slightly decreased to 53.8 in October due to ongoing demand within the country. However, companies have invested in machinery to increase production capacity to meet the growing demand. Nonetheless, these investments also expose companies to higher costs, elevated interest rates, and potential future inflation.

CBR recorded a budget deficit of approximately 1.231 trillion rubles in October. Government spending increased by 11% from the previous year, reaching 23.341 trillion rubles. The main reasons for this increase are higher spending on the conflict in Ukraine and stimulus measures that have been in place since the start of the conflict. Meanwhile, government revenue increased by 4.4% to 19.734 trillion rubles due to increased taxes to compensate for decreased revenue from oil and gas prices resulting from price drops.

Techical analysis data (5H)

Resistance: 92.1670, 92.2586, 92.3571

Support: 91.9769, 91.8784, 91.7868

Source: Investing.com