Page 49 - RusRPTMay21

4.2.1 CPI dynamics
In April, inflationary expectations of the population and business increased further.
According to a survey by LLC “InFOM”, inflationary expectations of the population have increased significantly, reaching their maximum values since February 2017. According to the results of monitoring carried out by the Bank of Russia, assessments of short-term price expectations of enterprises are also continued to grow rapidly. Imputed inflation for the next two years, embedded in prices
OFZ-IN, in April remained almost unchanged compared to the average values in March (3.8%).
Professional analysts' inflation forecasts for 2021 and 2022 increased, but remained close to 4%. According to the forecast of the Bank of Russia, inflation in 2021 will amount to 4.7-5.2%. In conditions the current monetary policy, annual inflation will return to the goal of the Bank of Russia in mid-2022 and will be close to 4% thereafter. The trajectory of the key rate will largely depend on the rate of decline in inflationary expectations of the population and business.
Poultry prices have added more than 10% in the last 60 days and that could trigger the price capping mechanism, according to the Ministry of Agriculture. Rosstat reports retail prices up 8% y/y and 23% y/y for poultry and eggs, respectively, in 2mo21. We see the prime reason being the higher prices for cost components, that were 20-45% y/y higher in 1Q21 for feed, while certain input cost are linked to FX. Poultry is the most consumed meat in Russia; 5mnt was produced in 2020, and it accounted for 45% of total meat consumption in the country. Exports are only just ramping up and reached 5% of output volumes last year. The largest players are Cherkizovo (14% market share), Resource (12%) and Prioskolie (7%). Potential price caps for poultry products would add to those on sugar and sunflower oil. The latter saw price caps 10-14% lower than the market at the time of their introduction in December. We anticipate final details on the implementation, but note downside risks to poultry prices that could in turn pressure other types of meat, particularly pork.
4.2.2 PPI dynamics
In parallel with the rise in consumer price inflation (CPI) the producer price index of inflation (PPI) has also been rising over the first quarter much more quickly as industrial production picks up to reach 16% as of March.
49 RUSSIA Country Report May 2021 www.intellinews.com