Russia: Inflation slows for the first time since December 2023 but remains elevated in September
Latest reading: Inflation slowed to 8.6% in September from August’s 9.1%, but the reading surprised markets slightly on the upside. Looking at the details of the release, softer price pressures for both goods and services drove the downtick. That said, overall price growth remained entrenched well above the 4.0% target of the Central Bank of the Russian Federation (CBR). Core inflation edged down to 8.3% in September from the previous month’s 8.4%.
Meanwhile, the trend pointed up, with annual average inflation coming in at 8.0% in September (August: 7.8%).
Lastly, consumer prices rose 0.48% in September over the previous month, accelerating from August’s 0.20% increase.
Outlook: Our panelists expect inflation to ease from Q4 onwards, tempered by a higher base of comparison and the effect of interest rate hikes filtering through the real economy. That said, price pressures will continue to be fueled by labor shortages and a weaker ruble year on year. Moreover, inflation is forecast to remain entrenched above the CBR’s target throughout our forecast horizon until 2029.
Panelist insight: Goldman Sachs’ Clemens Grafe commented:
“The decline [in inflation] will be slow given the degree of overheating with an unemployment rate of 2.5%, and we see inflation at the end of the year at 7.7%. The CBR in its last meeting raised the key rate by 100bps to 19% and kept a hiking bias. […] We think the CBR is going to remain on hold from here, and only start to cut rates slowly from Q1-25, keeping policy is restrictive territory all through 2025.”