Weekly inflation in Russia accelerated to 0.18% on an annualized basis

(Ministry of Development data added, general information)

MOSCOW, July 19 (Reuters) –

Weekly inflation in Russia accelerated with annual price increases approaching nearly 4%, reinforcing expectations that the Central Bank will raise its key rate this week for the first time in more than a year.

The increase in consumer prices in Russia from July 11 to July 17, 2023 accelerated to 0.18% from 0.14% a week earlier, Rosstat reported on Wednesday, a few days before the next meeting of the CBR board of directors on the exchange rate.

Since the beginning of July, according to the statistical service, inflation was 0.38% compared to deflation of 0.39% in July 2022. Since the beginning of the year, prices have increased by 3.15%.

Annual inflation as of July 17, according to the Ministry of Development, increased to 3.86% from 3.59% a week earlier.

Among groceries, the price of granulated sugar rose the most last week – by 1.1 percent. against 0.8 percent a week earlier – and fruit and vegetables, whose price increase doubled, on average by 0.8 percent. against 0.4 percent week earlier.

Among non-food items, the increase in the prices of TV sets increased significantly – to 1.4% from 0.6%, smartphones – to 0.5% from 0.1%, and cars of foreign brands – to 0.4% from 0.1%.

The increase in petrol prices also continued to accelerate – to 0.5% from 0.4%. The cost of an economy class flight was up 2.0% from 4.8% a week earlier.

In early June, the Bank of Russia allowed an increase in the key rate at the July 21 meeting due to the increase in pro-inflationary factors, and since then, Central Bank officials say that risks have increased even more and the current price dynamics are above the base path.

Most analysts believe the Central Bank will raise the interest rate by 50 basis points to 8.0% on Friday, but after the release of data from the Central Bank that inflation expectations of the Russian Federation population in July rose by 0.9 percentage points to 11.1% in July, some economists suggested that this increased the likelihood of a more aggressive rate hike.

Annual inflation began to fall sharply in the spring from last year’s high base, when prices in Russia surged after Moscow launched a “special military operation” in Ukraine, and the West responded with sweeping sanctions, only to pick up again in June when the effect wore off.

The head of the Central Bank, Elwira Nabiullina, said that the Central Bank expects a local maximum of annual inflation at the end of 2023 – in the first half of 2024.

CBR estimates inflation in 2023 in the range of 4.5-6.5% after an 11.9% increase in prices last year, expecting to return to the target of 4% in 2024. (Daria Korsunskaya. Editor Dmitry Antonov)