Inflation seemingly stabilizes

RUSSIA ECONOMICS - In Brief 16 May 2022 by Alexander Kudrin

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After some delay caused by limited number of working days in early May (due to national holidays) Rosstat reported that inflation in April reached 1.56% m-o-m and 11.67% YTD. Inflation y-o-y hit 17.83%. These figures were generally expected as consumer demand has likely started to shrink, especially for durable goods as inflation in the non-food segment in April fell to 0.53% m-o-m while cumulatively it was higher than general CPI (13.47% YTD and 20.19% y-o-y).In seven days ending May 6, inflation w-o-w decelerated to 0.12% which was lower than in previous weeks. Rosstat split this weekly inflation between the two months (April and May) in a way that on May 6 the MTD inflation reached 0.10%. Statistics showed that in the early May deflation was recorded for a greater number of non-food products (such as medicines, footwear, clothing, consumer electronics, etc.) At the same time deflation was seen for some food products as well (fresh fruits and vegetables).At a glance, one can anticipate that the m-o-m inflation in May is likely to fall well below 1%, and will probably stay in the range from 0.5% to 0.7%. If so, then the y-o-y inflation will stabilize and may even start falling as in May 2021, the m-o-m inflation was at 0.74%. It may encourage the CBR to cut the key rate again on June 10, when the next BoD meeting is due to take place.The main reason to bring the key rate to lower level is the need to support consumer lending which decelerated sharply after Russia launched its military “operation” in Ukraine. According to the Levada Center (branded by the authorities as foreign agent) consumer sentiment in April deteriorated considerably. When people were asked if they...