Consumer prices rose by 0.9% in Dec, leading its annual inflation to fall to 30.9% by end 2025. Lower than expected Dec figure and supportive early year tax adjustments create room for a similar 150bps rate cut in January; however, the persistent stickiness in inflation trend and expectations requires to remain cautious.

The Central Bank (CBRT) reduced the policy rate by 150bps to 38.0%, following the split among the rate cut expectations of 100-200bps. We forecast year end consumer inflation to be 25% on elevated inflation expectations and robust inertia, where the CBRT might continue to cut the rate toward 32% at the end of 2026.