Russia: Inflation remains stable in March
Inflation held steady at February’s 7.7% in March. March’s reading marked the joint-highest inflation rate since February 2023 and met market expectations. Looking at the details of the release, an uptick in prices for non-food goods in March largely offset softer price pressures for services. As a result, overall inflationary pressures remained well above the Central Bank’s 4.0% target.
The trend pointed up, with annual average inflation coming in at 5.7% in March (February: 5.3%). Meanwhile, core inflation ticked up to 7.8% in March, from February’s 7.6%.
Finally, consumer prices increased 0.39% in March over the previous month, below the 0.68% rise seen in February. March’s result marked the weakest reading since August 2023.
Our Consensus is for inflation to decrease from current levels by end-2024 as the lagged effect of prior monetary tightening filters through the real economy. That said, our panelists expect average inflation to remain above the Central Bank’s target through at least Q4 2025. Meanwhile, the persistent inflationary pressures could deter the Central Bank from kicking off its monetary policy easing cycle soon: A majority of our panel expects the first interest rate cut to come in Q3.
Analysts at Goldman Sachs commented on the outlook:
“We recently lowered our inflation forecast for this year, although the path remains unchanged, with headline inflation peaking in June at just under +9% yoy before gradually falling in H2. The CBR expects inflation to fall to the target (+4-4.5%) by year-end, which we view as overly optimistic given the size of the output gap.”