Page 42 - RusRPTFeb21

4.2.1​ CPI dynamics
Rosstat released its preliminary estimate for consumer inflation in December 2020 ​on 31 December 2020. According to the estimate, CPI soared from 4.4% y/y in November to 4.9% y/y in December, beating both our and consensus expectations. Preliminary data showed that the major driver of inflation was food prices increasing 1.5% m/m to 6.7% y/y. Both non-food items and services were up 0.4% m/m to 4.8% y/y and 2.7% y/y, respectively. Rosstat will release more detailed data based on the full basket tomorrow, 12 January.
Inflation expectations – one of the key gauges for conducting monetary policy – surged 1.4ppts to 11.5% y/y. Past inflation perceptions rose from 10.7% y/y in November 2020 to 12% y/y in December 2020. Specific food categories such as sugar, sunflower oil and eggs had the greatest effect on the quantitative inflation estimates, while the qualitative assessment of inflation worsened to a lesser extent. The government’s efforts to​ ​contain the growth in food prices​ should have a normalizing effect, in our view.
As has been the case over the past several​ ​months​, inflation has been rising on the back of higher food prices for both seasonal and non-seasonal products. The increased prices have been driven by the rise in international prices combined with a weaker ruble and high consumer demand for staples given the situation with COVID-19. We could see food prices ease the pressure on consumer inflation thanks to the government’s efforts, so CPI could start moving towards the CBR target of 4% from the end of 1Q21.
42 ​RUSSIA Country Report​ February 2021 ​ ​www.intellinews.com