Russia: Inflation stays unchanged at 7.3% for third consecutive month
June 6, 2016
Consumer prices increased 0.4% in May over the previous month, which was on par with both the reading registered in April and market expectations. According to the statistical office, the monthly reading shows a slight increase in food prices, while prices for services and for fuels moderated over the previous month.
In May, inflation stabilized at April’s 7.3% and remained at the lowest level since May 2014. Inflation began to decline in free fall in August 2015 from a peak of 15.8% and the rapid fall in inflation was mainly the result of a favorable base effect, which appears to have faded in May. Moreover, the recent stabilization of the Russian ruble has helped to diminish inflationary pressures. That said, inflation remains well above the Central Bank’s target of 4.0%.
According to some analysts, the current level of inflation bodes well for an interest-rate cut in the coming 10 June monetary policy meeting. Ivan Tchakarov and Ekaterina Vlasova, Senior Economists at Citigroup, stated that, “inflation continues to moderate on the back of declining inflation expectations and broader economic weakness.” The analysts also commented that, “positive inflation developments and, in our view, very high real rates argue strongly for initiating a rate-cutting cycle.” Russia’s Central Bank has left the one-week repo rate unchanged at 11.00% since September last year.
Author: Ricardo Aceves, Senior Economist