BOFIT Viikkokatsaus / BOFIT Weekly Review 2022/29

The 12-month rise in consumer prices fell from 17.1 % in May to 15.9 % in June. Over half of the cooling in inflation could be attributed to a slowdown in the rise of prices of fruits and vegetables.

The slowing rise in food prices (18 % y-o-y in June) largely reflects higher crop yields this year in southern Russia than in 2021, as well as the fact that Russia has eliminated import tariffs on certain fruits and vegetables. In addition, exports of some food commodities such as sugar have been restricted since the invasion into Ukraine in February. The reduced inflationary pressure on non-food goods reflects the subsiding of panic buying at the outbreak of the Ukraine war as people rushed to buy durable goods such as computers and home appliances. Exports are also restricted for certain goods such as construction materials. The strong ruble has also slowed inflation by making the prices for imported goods cheaper.

Russian inflation soared in March and April in response to the invasion of Ukraine. More recently, inflation has been moderating. Services were the only main inflation category to see a slight increase in June. The pace of services inflation largely reflected higher prices for transport services. For example, a number of Russian air carriers have seen pressures to raise prices as several countries have closed their airspace to Russian aircraft. On the other hand, Russian airlines have managed in some regions to increase their domestic business as demand for domestic tourism has risen due to complications with foreign travel. Services inflation was also raised by the fact that telecom operators, who have lost much of their access to foreign technology and equipment, have passed their increased costs on to consumers.

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