Page 102 - RusRPTAug24

Russian consumers is lifting inflation past the central bank’s earlier expectations. Inflation rose for services (8.8% vs 8.5% in May) and goods (8.5% vs 8.2%), with the latter being lifted by inflation for food (9.8%). From the previous month, the Russian CPI rose by 0.6%.
The regulator raised its inflation forecast for this year at the end of July to 6.5–7% instead of 4.3–4.8%. Next year, price growth is expected to be up to 4–4.5%. The forecast for the average key rate for the current year has increased to 16.9–17.4% from 15–16%. Next year, the Central Bank expects the average key rate to be around 14–16%.
Russia faces 6th straight month of price growth, Bloomberg reports. The annual inflation rate for June was 8.59%, up from 8.30% the previous month. The figure is significantly higher than that of the US, which is expected to be around 3.1% for the month of June.
The balance of inflation risks in Russia remains tilted to the upside over the mid-term horizon, with key proinflationary risks associated with change in terms of trade and persistently high inflation expectations, the Bank of Russia said in a press release. "Over the medium-term horizon, the balance of inflation risks is still tilted to the upside. The key proinflationary risks are associated with changes in terms of trade (including as a result of geopolitical tensions), persistently high inflation expectations and an upward deviation of the Russian economy from the balanced growth path," the regulator said. Disinflationary risks are primarily related to a faster slowdown in domestic demand growth than expected in the baseline scenario, according to the press release.
Annual inflation in Russia will peak in July, while its gradual decline is expected starting August or September, Deputy Governor of the Bank of Russia Alexey Zabotkin said. "We will probably see the peak of annual inflation now, in July, particularly due to a serious increase in public utilities rates <...> We expect to see a gradual decline in annual inflation starting August-September," he said in an interview aired by the Rossiya-24 TV news channel. The regulator expects the return to 4% inflation target in the middle of 2025, Zabotkin said. "The level of 4% will probably be reached by the middle or closer to the second half of next year," he said.
The Central Bank will take all the measures for inflation to be predictable and low, Governor of the Bank of Russia Elvira Nabiullina said. "We definitely need long-term available resources for financing. Therefore, it seems to me inflation is indeed absolutely harmful economically and socially, and we will endeavor that it is predictably low and that sustainable economic development to take place on its base," she said. The dramatic cut of the key rate and unpredictable high inflation "are capable of destroying long-term lending," Nabiullina noted.
102 RUSSIA Country Report August 2024 www.intellinews.com