Page 80 - RusRPTJun24

According to Rosstat, the price increase over the long “week” from April 23 to May 2 amounted to 0.06% n/a (after +0.12% on average over the previous four weeks), which, according to the Ministry of Economic Development, implies that annual inflation will remain at level of 7.8%, the same as “a week” earlier. The cumulative slowdown in weekly price growth rates is due to the accelerated decline in prices for fruits and vegetables (-0.72% n/a after -0.47% in the previous period) and air tickets (-8.34% n/a after -0.96%) , while the growth in prices for other food products remained high (+0.19% n/a after +0.18%), and the growth in prices for non-food products accelerated (+0.10% n/a after +0. 03%).
The consumer basket, on the basis of which monthly price growth rates are calculated, differs from that used for weekly dynamics (primarily in terms of services). However, the aggregate weekly data indicates a possible continuation of subdued inflation pressure in April (annualized price growth rate [SAAR] 4.1% y/y after 4.5% in March), which is favorable for the inflation forecast for 2024 , as well as the prospects of lowering the Bank of Russia’s key rate later this year.
Rising inflation expectations of the population does not contribute to softening the Bank of Russia’s rhetoric. Inflation expectations of the population on the horizon of the year increased by 0.7 percentage points in May. to 11.7% after a steady decline over the previous four months. In the group of respondents with savings, inflation expectations remained virtually unchanged over the past three months (9.8–10.0%), while in the group without savings, the decline gave way to growth in May (by 1.2 p.p. . up to 13.5%).
The previously published summary of the discussion of the key rate clarified the signal given by the Bank of Russia following the meeting of the board of directors on April 26. In addition to describing that the regulator was considering a 100 bp hike in the key rate, the summary contains indications that “new pro-inflationary surprises from economic activity require additional tightening of monetary conditions.” The latter, in our opinion, primarily implies continued high levels of real interest rates. An increase in inflation expectations, if this trend is stable, implies a slight decrease in the real interest rate (a softening of monetary conditions in this regard). The latter, in our opinion, will not contribute to a softening of the Bank of Russia’s signal at the next meeting, and further reduces the likelihood of a key rate cut in July.
80 RUSSIA Country Report June 2024 www.intellinews.com