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4.2 Inflation
Annual inflation was 3.7% in September and has risen to 4% in October.
Inflation has been exacerbated by the weakening of the ruble in recent months which was down 14% between June and November.
The analyst forecast for the end of the year is for inflation to finish at about 4.3%, slightly over the CBR’s target of 4%.
With the weakening of the ruble, inflation expectations have risen, which could raise the prices of goods and services in the coming months. On the other hand, inflation has been weakened by the slowdown in domestic demand after the summer. Inflation may also be slowed down by the potential for output to remain below potential.
The central bank estimates annual inflation to be 3.9-4.2% at the end of this year. For next year, the central bank forecasts inflation of 3.5–4%. After that, it expects inflation to remain close to 4%. The central bank's inflation target is 4% annual inflation.
While the uptick in food inflation was largely driven by supply shocks and the increase in global prices, the pick-up in the seasonally adjusted services inflation has become harder to interpret.
If, previously, an acceleration in services inflation with firming consumer
37 RUSSIA Country Report December 2020 www.intellinews.com
