Page 41 - RusRPTAug21

4.2 Inflation
For the first time since September 2020, Rosstat registered consumer price deflation of 0.01% at the end of July. The Central Bank has noted that inflationary forces have peaked and food prices levels had ticked down based on commodities in recent weeks. Food price deflation came a few weeks earlier this year than usual based on annual patterns, something to ponder for both climate change and attempts to impose price controls while producer prices have climbed significantly:
Surveys show much higher levels of inflation than the official data suggests — consumers thought it was at 14.9%, not 6.5% in June. And 1 in 6 respondents from the CBR’s survey think prices have risen 30% or more in the last year. We still don’t know how the high producer costs filter into consumer costs since there’s always a lag there. It’s good news that price increases have slowed. The question is how much of that is deflationary, how much of that is a matter of food production cycles, and how much of that is distributed to lower income Russians vs. higher income Russians.
Inflation in Russia has remained elevated since November 2020. Sberbank CIB said in a note its most optimistic scenario now expects year-end inflation of 5.2% this year. Growing domestic demand is an important factor driving inflation higher in Russia, but the rise in global food prices has made a big contribution as well. The CBR has limited ability to influence household demand and cannot do much at all about global inflationary pressures. Its best option for bringing inflation under control is continuing to raise rates, as this should help the ruble remain relatively strong.
41 RUSSIA Country Report August 2021 www.intellinews.com