Page 63 - RusRPTSept22

slowdown in the decline in prices for fruits and vegetables (food prices generally fell by 0.32%), multidirectional dynamics in non-food products (rising prices for cars, a fall in building materials) and a slowdown in prices for services. In annual terms, by August 8, inflation fell to 15.01%.
Two months of seasonal deflation in a row in modern Russia were only in 1997, 2017 and 2019 (August and September), three - in 2011 (July - symbolic 0.01%, August 0.2% and September 0.04%). June deflation in Russia was recorded for the first time this year.
Why is it important? Whether deflation is a sign of Russia sliding into a deflationary spiral (falling demand - falling profits of producers - falling wages - falling demand), from which the economy can emerge for decades, the Ministry of Economic Development and the Central Bank have been arguing since the beginning of summer. Minister Maxim Reshetnikov called for saving businesses with a cheap loan, but the Central Bank, as it did not recognize such a threat, still does not see it now, a source familiar with the regulator's position told The Bell.
There are no signs of a deflationary spiral, Alexander Isakov, chief economist at Bloomberg Economics for Russia, agrees: inflation expectations of Russians have fallen to a minimum since March 2021, lending has revived against the background of the Central Bank’s rate cut, and the money supply is growing in annual terms.
It was the stopping of inflation that allowed the Central Bank to cut the rate from 20% in March to the pre-war 8% in July, Bloomberg notes. Commenting on the latest decision, the Central Bank stated that pro-inflationary risks still prevail in the medium term, and predicted annual inflation of 12-15%. In the latest monetary policy report, the regulator did not rule out supply shocks in the third or fourth quarter and an acceleration in price growth. Another powerful pro-inflationary factor is the growth in spending and the budget deficit.
Disinflationary factors remain sluggish demand (which also slowed down in early August), as well as a decline in real incomes of the population.
63 RUSSIA Country Report September 2022 www.intellinews.com