Page 29 - bne IntelliNews Russia Country report May 2017
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4.2 Inflation
Russia is approaching 4% inflation target with strong ruble tailwind. At the outset of 2017, bankers had expected the CBR to struggle hard to reach its 4.0% inflation target for this year.
The good news is that annual inflation is very close to the target already; the bad news is that ruble appreciation explains 70% of the deceleration in annual inflation since 2016 .
The pass-through from ruble appreciation was 10%, unchanged from the 2010 episode – due to the unchanged high share of imports in total consumption. While summer deflation may push CPI to 3.0-3.5% y/y in 3Q, potential exchange rate volatility justifies a prudent 4% y/y forecast by December. Given the importance of the pass-through effect, bankers do not expect the CBR to be able to cut the policy rate below the 7.5% level by 2017YE.
29 RUSSIA Country Report May 2017 www.intellinews.com
