Page 62 - Russia OUTLOOK 2024

inflation forecast for 2023 has been increased to 7.6% (+0.6 pp compared to the October survey). Forecasts for the following years are unchanged. Analysts expect inflation to return to the target of the CBR in 2025 and remain at this level in 2026.
The rise in Russian inflation to 7.5% y/y in November is likely to be followed by further increases in the coming months as the economy continues to overheat. This CPI release supports the case for a 100bp interest rate hike by the central bank next week, taking the policy rate to 16.00%.
The outturn was up from 6.7% y/y in October and in line with our expectation, although a touch softer than the consensus (7.6% y/y). In month-on-month terms, consumer prices increased by 1.1%. This was the strongest monthly increase since April last year amid the sanctions and ruble shock.
The breakdown showed that increases in food, goods and services inflation all drove the headline rate higher. Food inflation rose from 6.0% y/y to 7.2% and non-food goods inflation increased from 5.1% y/y to 5.6%. Services inflation jumped from 9.9% y/y to 10.4%. RosStat’s measure of core inflation, which includes some food items, came in at 6.4% y/y.
The economy ministry raised its 2023 inflation forecast to 7.5% in September from the 5.3% forecast published in April, and also raised its 2024 forecast to 4.5% from 4.0%, according to economy ministry documents, which have been submitted to the government as a draft forecast.
The new inflation forecast implies that Russia will only achieve the central bank's inflation target of 4% in 2025 rather than in 2024, as planned by the bank. The central bank in July saw 2023 inflation in the range of 5.0%-6.5%, reducing to 4% in 2024; however, bank officials last week cautioned that price rises required decisive monetary policy measures and put at risk the inflation target.
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