Peak annual inflation in Russia

the Chairman of the Bank of Russia Elvira Nabiullina did not rule out that annual inflation in Russia will pass its peak in February 2021. This forecast it was announced at a press conference.

“Inflation, we will not be accelerated, we may increase the rates of annual inflation. This is due primarily to the low base effect of last year. In our view, if we take the figures of annual inflation, they figure will be the maximum at the beginning of 2021” — quoted by “Interfax”, Nabiullina.

“we Have the lowest inflation was in February last year, so there could be the high inflation, the annual figures can be (the highest — ed.) in February next year due to the base effect of this year”, — said the head of the Central Bank.

Earlier on Friday, the Board of Directors of the Bank of Russia lowered the key rate from 100 basis points to 4.5% per annum — to a new historic low.

in this press release, the regulator admitted that inflation in Russia in the conditions of predominant influence of disinflationary factors can deviate down from 4% in 2021.

As noted, the Central Bank, “the dynamics of inflation this year and in the first half of 2021 will largely formed under the influence occurred in the second quarter of deep fall of domestic and external demand”. “The disinflationary impact of weak demand has increased, which is associated with the current and pending economic effects of restrictions. Inflation expectations of population and business has declined after a brief increase in March—April,” says the regulator.

And the Bank of Russia States that “the impact on prices occurred in March of weakening of the ruble and a temporary increased demand for individual product groups have been exhausted.” According to preliminary data on June 15, the annual inflation rate was about 3.1%.

“In the coming months the dynamics POTREBITEL’sktheir prices will further curb the strengthening of the ruble observed in may — early June, on the stabilization of the global financial markets and rising oil prices. Current monthly inflation in annual terms will continue to decline. At the same time, the annual inflation rate will increase in 2020 due to low base effect in 2019,” — said the Central Bank.

He believes that “in terms of the overwhelming influence of disinflationary factors there is a risk of significant deviation in inflation from 4% in 2021”. “The decision on the key rate is aimed at limiting this risk and keeping annual inflation near 4%,” — says the Central Bank.

Recall that, according to Rosstat, consumer prices in Russia from 9 to 15 June 2020 increased by 0.1% compared to the previous week, when it was recorded zero inflation, and since the beginning of the year it reached to 2.5%.

In may, consumer prices in Russia rose 0.3% the previous month, when they rose 0.8%. While yoy inflation in may slowed to 3% after 3.1% in April.

Over the past year, consumer prices rose by 3% (December to December 2018). Thus, 3-percent inflation rate in 2019 was the second lowest value of this indicator for all history of modern Russia. The absolute minimum was recorded at the end of 2017 and 2.5% in 2018, prices increased by 4.3%.

the Ministry of economic development, according to the updated macroeconomic forecast expects annual inflation to end this year at 3.5%. For its part, the Bank of Russia assumes that inflation for the year will amount to 3.8-4.8% and will be close to 4% thereafter.

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