Page 41 - RusRPTJun20

period of negative and zero inflation seen in 2H19 is unlikely to be repeated in 2020). On the other hand, price growth will be capped by persistent weak domestic demand, a stronger currency and continued capital inflows to the local bond market.
Russia’s trend inflation accelerated to 4.05% in April from 3.98% in March​, the central bank said in a statement on May 19. A trend inflation estimate calculated for a shorter, three-year interval, rose to 3.54% in April from 3.29% in March.
CBR Governor Elvira Nabiullina said the inflationary shock caused by the drop in the ruble and jump in demand for food and other essentials in March will be temporary ​on May 8, and the latest weekly figures show that the effect is gradually fading. “This supports our view that inflation should start to stabilize soon at levels consistent with annual inflation of 3.5-4.0%. It should also pave the way for the CBR to cut the key rate at its next policy meeting in June. Nabiullina said a 100 bp cut could be in the cards, Sberbank CIB analysts Anton Stroutchenevski, Rodion Lomivorotov and Artem Vinogradov said in a note. “She also said the bank will commence 1m and 1y repo operations to tackle the uneven spread of liquidity in the banking system.”
4.2.1​ CPI dynamics
CPI accelerated to 3.1% year on year in April ​and is likely to continue in the coming months, mainly due to the pressures in the food segment and despite disinflationary services. Nevertheless, this is unlikely to prevent Bank of Russia from making at least one 50 bp cut, especially if the fiscal stance remains conservative, says ING.
41​ RUSSIA Country Report​ June 2020 ​ ​www.intellinews.com