Russian consumer prices dip again but inflation expectations rise

The consumer prices index (CPI) dipped 0.15% in the week to Aug. 22 after easing 0.13% a week earlier, the federal statistics service Rosstat said on Wednesday.

Russians focus closely on inflation among economic trends as rising prices eat into living standards. Annual inflation reached 15.1% in July, far above the central banks 4% target.

As of Aug. 22, annual inflation slowed to 14.60% from 14.87% a week earlier, the economy ministry said on Wednesday.

Although the economy has avoided the meltdown many predicted after Moscow sent its forces into Ukraine six months ago, with higher prices for its oil exports cushioning the impact of Western sanctions, hardships are emerging for some Russians.

In annual terms, inflation remains high but is slowing after prices of nearly everything, from vegetables and sugar to clothes and smartphones, jumped sharply after Russia began what it calls a “special military operation” in Ukraine on Feb. 24.

Inflation in Russia surged to 20-year high in 2022

The CPI has extended its decline even after the central bank slashed its key rate by 150 basis points to 8% last month and indicated it was ready to consider further monetary easing to limit the depth of an economic recession.

A sound harvest could pave the road for a decline in the CPI in August and September, which in turn could cement expectations for further rate cuts and steer yields of OFZ government bonds lower, said Dmitry Polevoy, head of investment at Locko Invest.

But perceived inflation remains higher than the headline CPI figure as people tend to focus on prices for particular goods and services.

In the first seven months of 2022, prices for sanitary pads and soap rose more than 40%, while prices for flight tickets rose nearly 32%, Rosstat figures show.

GRAPHIC – Consumer prices in Russia rose sharply in 2022

Russian households said their observed inflation on average declined to 20.5% in August from 22.2% in July but inflation expectations for the year ahead rose to 12.0% from 10.8%, the central bank said in a report on Wednesday.

“The official consumer price index is considered to be half as low as ‘people’s inflation but in some cases this gap can be larger,” said Pavel Sigal, first vice-president at Opora Rossii, a non-governmental organisation that represents the interests of small- and medium-sized businesses.