Page 39 - RusRPTMar21

4.2 Inflation
In January, consumer prices in Russia grew 0.7% m/m. This pushed annualized inflation to 5.2%, well above the CBR’s target rate of 4% –and the highest level of inflation since May 2019.
4.2.1 CPI dynamics
The rise in CPI to 5.2% in January was expected, although we and consensus were forecasting even higher levels (5.3%). Our estimates would have been proven correct if it were not for an unexpected change in Rosstat’s methodology: last week, the agency raised the share of food and cut shares of non-food goods and services in the consumer basket, which allowed it to report zero w/w inflation during the last week of January. Before that, CPI in Russia was growing at a 0.2% w/w rate for 8 consecutive weeks; last time there was zero weekly inflation was in late September 2020.
Food leads price growth. There were no changes in drivers behind last month’s inflation: food prices were the prime driver (1% m/m, 7% y/y) followed by prices of non-food consumer goods (0.5% m/m, 5.1% y/y) and communal services (0.4% m/m, 2.8% y/y). Core inflation in January increased by 4.6% y/y, down from 4.9% in December 2020.
No rate hike from CBR, FX – key to future inflation. Last month, the real key rate in Russia remained just below -1%. Recent changes in CPI methodology will mute the effect from last year’s RUBdevaluation on non-food prices – this will stabilize annualized inflation and will lower the pressure on the CBR to
39 RUSSIA Country Report March 2021 www.intellinews.com