Rise in Russian consumer prices slowed in January-May

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/23

May consumer prices were up less than 3 % from December, whereas the comparative figure in 2015 was well over 8 %. As in the previous two months, May consumer prices were up 7.3 % y-o-y. The last time such a relatively lower 12-month inflation score was seen in April 2014.

Food prices have been the strong mover in consumer prices in recent years. The fall of the ruble at the end of 2014 and Russia’s countersanctions in August 2014 that brought import bans of certain foods, sent food prices to a level 19 % higher on average in 2015 than in 2014. This year, food prices have risen considerably slower in on-year terms than prices of other consumer goods and services. Part of this reflects an increase in domestic food production and a partial shift of demand from imported food items to cheaper domestic products. Food prices were up 5.6 % y-o-y in May, while prices of services and non-food goods were up 8.4 % y-o-y.

Consumer price inflation in recent months has been 3.7 percentage points lower than the CBR’s key rate (at 11 % since August 2015), making the key rate clearly positive in real terms. Central Bank of Russia forecast has consumer prices up 6–7 % y-o-y at the end of this year, and the Bank expects to reach the 4 % inflation target by the end of 2017.

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