Page 41 - RusRPTJun21

of 2Q21, headline CPI could remain at the current 5.4-5.8% y/y, with the risks skewed to the upside. Elevated inflationary pressures amid the rapid recovery in domestic demand led CBR to hike the key rate 50bps in April. We do not rule out the further frontloading of rate hikes at CBR’s upcoming meetings in June and July, and we now see the key rate at 6% by YE21 and the rate-hiking cycle ending at 6.5%, Sova Capital concluded.
The Russian population is currently expecting inflation to soar to 14.5%, despite the fact it is currently 5.5% and looks like it is starting to fall.
For a people that lived through the years of hyperinflation in the 90s, rising costs in times of crisis is something of a bogey man and inflation fears consistently ranks as one of the issues people worry about more than anything else.
Russia's annual consumer price inflation in April 2021 slowed down to 5.5%
from 5.8% year on year in March, according to the latest data from RosStat statistics agency, and in line with expectations.
More recently Russia's weekly consumer price inflation for the week ending May 11 slowed down to 0.1% week on week, according to the latest data from RosStat statistics agency.
Although the weekly inflation slowed down from its previously persistent 0.2% w/w reading, 0.1% w/w remains "a fairly high figure, corresponding to 0.6% growth in monthly terms", Sberbank CIB commented on May 14.
But even the 0.1% w/w rise is nowhere near the level that will lead to a 14.5% year-on-year rise in prices the population is expecting.
“According to [a central bank] survey, observed and anticipated inflation have risen rapidly in April. While observed inflation has risen to 14.5% year on year in April vs. 12.7% in March, 12-month-ahead expectations have risen to 11.9% y/y in April vs. 10.1% y/y in March,” Sova Capital said. “Notably, the subgroup without savings witnessed a steeper rise in both observed and anticipated metrics (16.4% y/y in April vs. 12.4% y/y in March in the observed component and 12.5% y/y in April vs. 10.6% y/y in March in the expected component).”
The reason for the pessimism is the price of staple goods like sugar, pasta and fruit and veg have all soared in the last year, with some prices doubling.
41 RUSSIA Country Report June 2021 www.intellinews.com