Inflation in Russia

RUSSIA / FSU POLITICS - In Brief 13 Aug 2021 by Alex Teddy

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On August 9 the Russian Statistics Agency published data showing that food prices are coming down after months of increase. Inflation for food came down from 7.9% per annum in June to 7.4% in July. The government will be pleased. It knows that food price rises will hit its popularity. 12% of Russians are under the official poverty line. Real poverty is perhaps double that.The Central Bank of Russia has raised interest rates in an effort to cut rampant inflation. Overall inflation was 6.5% in July - the same as June. Inflation has not been as bad as most pundits forecast. The Central Bank of Russia will probably not raise interest rates as much in the next few months because inflation has slowed. Tourism is restarting. The world economy is recovering. In 2020 Russians spent an additional USD 30 billion more in Russia than they would have done in an ordinary year because it is impossible to go abroad. In 2021 there will probably be a similar extra amount spent at home.Core inflation rose in July to 6.8% per annum. Much depends on the harvest. A bad one will raise inflation. At the moment the prospects for the harvest look rosy. Food prices around the world are stable.Prices are higher than the CBR's target of 4%. The Governor of CBR is worried that the public thinks prices are higher than they really are. Russia suffered financial crises, RUB devaluations and very high inflation in the 1990s. That still leads to hoarding behavior that fuels inflation. The Kremlin is perturbed. September 2021 sees parliamentary elections. The major pro-Kremlin party is United Russia. It is polling at only 25%. Financial hardship is one of the main reasons for people turning against United...