Similar to what the U.S. is about to experience when the misguided Federal Reserve institutes another round of quantitative easing, Citigroup (NYSE:C) said the rapid growth of the money supply in Russia will result in increased inflationary pressure through 2011 in the country.
Citigroup economists based in Russia, Elina Ribakova and Natalia Novikova, wrote in a research note that they see inflation growing to 9.2 percent through the end of 2010, and at 7.6 percent for 2011, based on an increase in the Russian money supply of 30 percent for September.
They economists said, “Growing producer costs and the acceleration of money supply growth will add to inflationary pressures from the end of 2010 and into 2011. However, we expect the central bank will remain under pressure not to increase rates in order to support a greater issuance of government bonds.
“We are concerned that, without a significant appreciation, pressure on the ruble and a weak interest rate transmission mechanism, inflation will remain elevated in 2011."
The money supply in Russia has increased at an annual rate of over 30 percent each month for seven months in a row, culminating with an increase of 31.2 percent in September, according to data from Bank Rossii.
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