Russia Inflation April 2024

Russia: Inflation rises to an over one-year high in April

Inflation ticked up to 7.8% in April from 7.7% in March. April’s reading marked the highest inflation rate since February 2023 and met market expectations. Looking at the details of the release, an uptick in prices for food and non-food goods outweighed softer price pressures for services. As a result, overall inflationary pressures rose further above the Central Bank’s 4.0% target.

Accordingly, the trend pointed up, with annual average inflation coming in at 6.1% in April (March: 5.7%). Meanwhile, core inflation rose to 8.3% in April, from March’s 7.8%.

Finally, consumer prices increased 0.50% in April over the previous month, above the 0.39% rise seen in March.

Our Consensus is for average inflation to decrease from current levels by end-2024 as the lagged effect of tight monetary policy filters through the real economy. That said, our panelists expect average inflation to remain above both the Central Bank’s target and its medium-term forecasts of 6.2–6.4%. Meanwhile, the uptick in inflation will likely encourage the Central Bank to keep its monetary policy restrictive when it next convenes on 7 June.

Goldman Sachs’ Clemens Grafe commented:

“In our view, inflationary pressure continues to be fuelled by a large output gap stemming from last year’s loose fiscal and monetary policy. […] Our inflation forecasts remain more hawkish than both the CBR and consensus, as we think domestic demand shows no signs of cooling, indicating that despite the CBR’s relatively tight stance, the output gap has not significantly narrowed.”

JPMorgan’s Anatoliy Shal added:

“Although the broad inflation picture remains problematic, […] higher inflation readings were mostly due to large price increases in heavy-weight items, while the underlying inflation trajectory might be lower than headline numbers would suggest. Still, even with this caveat, as the economy and the labor market remain in good shape, securing inflation slowdown may take more time and risks to our end-2024 CPI forecast of 5.4%oya are probably skewed to upside.”

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