Russia: Inflation plunges in October to lowest level in nearly three years
November 3, 2016
In October, consumer prices increased 0.4% from the previous month, which was up from the 0.2% rise seen in September. The increase reflected higher prices for goods, particularly for food products, clothing and footwear, as well as for medicines.
Inflation fell from 6.4% in September to 6.1% in October, which undershot the 6.3% the markets had expected and marked the lowest level since January 2014. Russia’s Central Bank has played an important role in bringing down inflation. As expected, the Bank maintained its “hawkish” easing stance at its latest policy meeting in October, keeping interest rates unchanged at 10.00%, citing its commitment to bring down inflation to its 4% target in 2017. Still, it is unlikely that October’s faster-than-expected fall in inflation will prompt the Bank to change its strategy of keeping rates on hold until Q1 2017. Liza Ermolenko, Emerging Market Economist at Capital Economics, suggests that:
“This is unlikely to cause the central bank to change its mind, and interest rates will almost definitely be kept on hold at the MPC meeting in December. But today's data do reinforce our view that the easing cycle, when it eventually comes, will be substantial.”
The inflation trend confirms the downward trajectory: annual average inflation fell from 9.3% in September 8.5% in October.
Author: Ricardo Aceves, Senior Economist