Page 49 - RusRPTNov21

4.2.1 CPI dynamics
Russian inflation accelerated to a fresh five-year high of 7.4% y/y in September and, while this was mainly driven by a sharp increase in food inflation, the central bank is likely to continue its tightening cycle for a little longer at the next couple of meetings.
The outturn was up from 6.7% y/y in August and took the headline rate to its highest level since July 2016. Prices rose by a chunky 0.6% in month-on-month terms, which is much stronger than seasonal norms.
Most of the strength came through food inflation, which surged from 7.7% y/y in August to 9.2% y/y. Fruit and vegetable prices rose by 1.8% m/m, which is a surprising result and marks only the second time in 20 years when prices have bucked seasonal norms and risen in September. Above all, this is likely to reflect the impact of ongoing supply-side shocks. But it may also be due to the government’s cash handouts to families and pensioners in August and September, which pushed food sales higher last month.
Non-food goods prices rose by only 0.6% m/m in September, its smallest increase since February. This pushed non-food goods inflation only slightly higher to 8.1% y/y and suggests that the inflationary impact of strong demand and ongoing goods shortages may be fading. Services inflation rose slightly to 4.2% y/y. Our seasonally-adjusted measure of non-food prices has now slowed in month-on-month terms for four consecutive months.
49 RUSSIA Country Report November 2021 www.intellinews.com