Page 35 - RusRPTMay20

food and essential products. The weekly price dynamics suggest that inflation will further accelerate in April and May, moving beyond 3% y/y. However, after that the monthly dynamics should settle at levels consistent with 4% annual growth, as weak demand should begin to act as a constraining factor.
Modified core inflation jumped to 0.35% m/m in March, the highest level since the start of 2019. The modified core inflation gauge has picked up significantly from the 0.15% m/m registered in February and the 0.16 0.18% range over the previous six months. This owed to a weaker ruble (which plunged almost 15% in March), as well as a spike in demand for food and other essentials due to the spread of Covid-19 and lockdown measures.
Official headline inflation increased from 0.33% to 0.55% m/m in March, while core inflation rose from 0.11% to 0.51% m/m. In y/y terms, headline inflation stood at 2.5% at the end of March, while annualized modified core inflation, which the CBR considers a better measure of current monetary inflation, reached 4.2%.
Weekly price statistics suggest that inflation could accelerate to 3% y/y in April. Statistics for the week ending April 13 showed that prices were up 0.5% since the beginning of the month, already exceeding the 0.3% m/m growth in April 2019.
Average daily inflation stood at 0.036%, exceeding the usual range of 0.010-0.020% for the period. It is likely that headline inflation will continue to accelerate in April, reaching 3% in y/y terms, and then climb even higher in May. However, after this the monthly price dynamics should start to stabilize at levels consistent with 4% annual growth, as weak domestic demand should begin to act as a constraining factor.
35​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com