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inflation this year could end under 4%.
Central Bank of Russia (CBR) is worried that catch-up budget spending on the national projects in 2H19 risks driving inflation up, in addition to concerns about the government’s plans to spend savings from the National Welfare Fund. Concerned that fiscal policy will threaten price stability, the CBR likely will not cut rates as quickly as business would like. The particular challenge posed by the national projects is that spending is harder to track. Some national project funds go through regional budgets, while others go through extra-budgetary funds. So while the inflationary consequences can be significant, the CBR is unsure to what extent. And with hawkish Elvira Nabiullina at the CBR’s helm, we can expect the bank to proceed with caution.
4.2.1 CPI dynamics
Russia’s inflation slowed to 4.7% in June in annual terms from 5.1% in May, the central bank said in a statement on Monday quoting the Federal State Statistics Service. The service is yet to publish its data officially. On July 3, First Deputy Chairwoman of the Central Bank Ksenia Yudayeva said that the slowdown of inflation in June was triggered by a good weather, which accelerated harvesting of vegetables. The factor could continue in July but was a short-term one, she said.
4.2.2 PPI dynamics
Producer price index of inflation (PPI) slowed notably in June to 4.1%
32 RUSSIA Country Report August 2019 www.intellinews.com