Page 42 - RusRPTJul21

· Whether an operational target is the appropriate approach.
No further details have been provided. The CBR plans to consult widely on the
issue, so any changes should come as no surprise.
Surging inflation is not a temporary trend and poses a serious threat to Russia’s economic recovery, Central Bank chief Elvira Nabiullina warned during the St Petersburg International Economic Forum (SPIEF) annual investment summit.
“We have very hot inflation and high inflation expectations. At first it seemed like it would be temporary. But now we don’t think so,” Nabiullina told the opening session of SPIEF on June 4. “The continued acceleration of inflation will be an impediment to economic growth.”
The Central Bank has said it will continue to raise rates over the year, hitting around 5.75% by December. But markets are pricing in a much steeper increase, with prices suggesting traders expect rates could be closer to 6.5%. Nabiullina’s comments won support from Finance Minister Anton Siluanov, who added that Russian government spending would also need to be brought back down to pre-pandemic levels — rejecting the idea that Russia might ditch its spending austerity.
Inflation in Russia will return to the target of 4% not earlier than in a year, the Central Bank warned. Annual inflation, which exceeded 6% in May for the first time in five years, will return to the target 4% only in the second half of 2022, the Central Bank admitted in a monthly information and analytical commentary on the dynamics of consumer prices. Back in February, the Central Bank believed that inflation would return to the target of 4% by the end of 2021, and in April by mid-2022.
The highest rise in prices (7.4% - almost a percentage point higher than in April) was observed in the group of food products, but non-food products also rose above inflation (by 6.68%), the Central Bank notes. In the latter group, the price increase in May 2021 became a record in more than five years - since March 2016. Services are becoming more expensive below average inflation (3.3%).
The maximum inflation in May was recorded in the North Caucasian Federal District (6.85%), the minimum - in the Northwestern Federal District (5.92%). The leaders among the regions were Kalmykia (8.12%), Khakassia (8.07%) and Dagestan (8.06%). The lowest prices are growing in Siberia (the leaders are the Republic of Altai, the Tyumen region and the Kamchatka Territory).
42 RUSSIA Country Report July 2021 www.intellinews.com