Russian M2 Money Supply (Sep YY) 13.3% (Prev. 12.8%)

Russian M2 Money Supply (Sep YY) 13.3% (Prev. 12.8%)

Russian broad money aggregates have taken on a different signalling role since the sanctions regime began, with M2 expansion reflecting the combination of fiscal spending channelled through the domestic banking system, compulsory re-routing of export revenues, and capital controls that trap liquidity onshore. An acceleration of the pace shown here is consistent with the wartime fiscal impulse and has historically fed through to domestic inflation with a lag, which is the channel that matters for the central bank's reaction function rather than the aggregate itself. Precedent in episodes of rapid monetary expansion in a closed capital account is that the pressure shows up in goods prices and import demand rather than in an externally driven currency move, since the ruble's exchange rate is managed within a thin, heavily intermediated market. The peer distinction worth drawing is between this kind of fiscally driven growth and credit-driven growth, which carries a different persistence profile. The follow-ons are the domestic inflation prints and the central bank's rhetoric around them, which in comparable phases has skewed hawkish when money growth outruns nominal output. For FX purposes the read-through is indirect, working through the policy rate path and the trade balance rather than through any direct transmission to the fix.