“The country is on the brink of an inflationary disaster.” Russia faces the largest price hike since the beginning of the war

The summer devaluation of the ruble, which placed the Russian currency among the top three weakest in the world and made it the world leader in volatility, promises the Russian economy the biggest acceleration in inflation since the beginning of the war.

Retailers and distributors of goods ranging from beverages to cars and household appliances are bracing themselves for double-digit price increases after the dollar rose to 90 rubles and the euro topped 100.

Cars imported to the Russian Federation via parallel import will be 15-20% more expensive, predicts Avtodom. New price tags will appear in showrooms in a month or two and will be more than 60% higher than pre-war prices: last year the average price of a new car increased by 20%, and in the first half of this year by another 13%

Juices and sodas will go up by 10-20% from August 1 – PepsiCo and Gardens Pridonya have already sent “letters of happiness” to retail chains regarding price increases. Juice producers bear 70% of their primary costs from imports – these are concentrates and purees, which is why they are heavily dependent on exchange rates – says Maxim Novikov, head of the Soyuznapitki profile association.

Home appliances suppliers have warned retailers against price increases of 10-15%. Among the producers who are preparing to rewrite price lists is Archelik (brands Beko, Grundig, Indesit etc.), SEB-East group (Tefal, Moulinex, Rowenta), Maunfeld, Lex e.t.c. Prices for all goods in this category will inevitably increase, since “the vast majority of equipment imported to the Russian Federation is paid for in foreign currency,” warns RATEK representative Anton Guskov.

Apple gadgets and other foreign brands may increase in price by 10-20%. And this is still an optimistic forecast, says Eldar Murtazin, a leading analyst at Mobile Research Group: mass imports of equipment are paralyzed, stocks in warehouses are low, and as soon as they run out, prices will go up.

The situation is exacerbated by the rapid increase in freight prices. Due to the sanctions, there was a shortage of trucks in Russia, and the mobilization caused a shortage of drivers. As a result: since the beginning of the year, the cost of transporting goods in Russia has increased by 38%.

Due to the lack of Western equipment and spare parts, the prices of air tickets may also increase sharply – by the end of the year by 40%, predicts Vitaly Vantsev, co-owner of Vnukovo airport. This will add to the headaches of tourists already facing exploding travel prices. So holidays in Turkey, according to the Alliance of Travel Agents, have become more expensive by 20-70%, depending on the hotel and accommodation.

“The country is on the brink of a major inflationary catastrophe,” MMI analysts write. The devaluation of the ruble has increased inflation expectations among consumers who spend more, and this “significantly increases inflationary pressures.”

Rosstat modestly estimates the current inflation – 3.6%, which is 5 times less than the record values ​​​​for 20 years in April 2022. But the weekly growth rate of prices is increasing: 0.18% on July 11-17 against 0.14% and 0.15% in the previous two weeks.

The Central Bank will respond to the rise in inflation by tightening its monetary policy. At its meeting on Friday, July 21, the regulator will immediately raise the key rate by 75 basis points to 8.25% per annum, economists polled by Bloomberg expect on average. But the devaluation effect will inevitably persist for a long time: even if the ruble strengthens, importers will factor in higher exchange rates in their prices, warns Yegor Susin, managing director of GPB Private Banking.