Page 40 - RusRPTJul20

4.2​ Inflation
Russia's consumer price inflation (CPI) decelerated to 0.3% month on month in May 2020 from 0.8% seen in April, according to the latest data from RosStat statistics agency. Annual inflation also moderated to 3% from 3.1%.
As reported by ​bne IntelliNews​, ​inflation spiked in April​, but the price growth is expected to be contained by depressed consumer demand amid the coronavirus (COVID-19) shock, as the Central Bank of Russia (CBR) ​started a monetary easing cycle​ and guides for a ​front-loaded rate cut in June​.
BCS Global Markets on June 8 welcomed the slowdown in price growth, while warning that the short-term inflation trend will be tested in the next few months, as the "base factor will make it a challenge for an annualised CPI rate even to remain flat." Still, BCS GM still expects the CBR to follow through on its guidance to cut the key interest rate by 50-100bp on the next policy meeting of June 19.
The main driver behind the deceleration in the price growth trend was food and in particular, prices of fresh vegetables and fruit, which fell by 0.4% m/m (in May 2019 these prices went up by 2% m/m).
Overall, in May food became more expensive by 0.2% m/m (moderating from 1.7% m/m in April), while prices of nonfood consumer goods rose by 0.3% m/m (0.4% in April) and the cost of utility services increased by 0.5% m/m (versus 0.1% in April).
The analysts believe that the prime underlying factor behind the slowdown in inflationary pressures has been a significant appreciation in the exchange rate of the Russian currency (3.7% m/m gain against the US dollar in May).
40​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com