Russia's inflation at 6.7% in August, to remain above target until 3Q22

Russia's inflation at 6.7% in August, to remain above target until 3Q22
Russian inflation still on the rise and not expected to moderate back to targets before mid-2022 / bne IntelliNews
By bne IntelliNews September 13, 2021

Russia's consumer price index posted 0.2% month on month and 6.7% year on year in August 2021, according to the latest data from RosStat statistics agency. Inflation continued to accelerate, in line with previous weekly readings, and was slightly above the Bloomberg consensus expectations of 0.1% m/m and 6.7% y/y.

As reported by bne IntelliNews, inflation is still on the rise and inflationary expectations remain elevated. Last week the Central Bank of Russia (CBR) continued to toughen its monetary policy and raised its key rate by 25 basis points to 6.75% per annum. 

In August, the pro-inflationary upturn mostly came again from food, while in non-food, price pressures also remained elevated.

"More importantly, after the CPI run rate dipped in July to +3.7% SAAR [seasonally adjusted annual rate], it surged to +7.3% SAAR in August," VTB Capital (VTBC) estimated, comparing this to the estimate of the Ministry of Economic Development of +8.2% SAAR (+0.66% m/m SA).

As a result, VTBC revised the point estimate for the 2021 headline CPI to 6.5% y/y, which exceeds the CBR forecast of 5.7%-6.2% y/y. The analysts expect additional price pressures in the remainder of 2021 to arise from pre-election social support spending.

VTBC now expects the CPI run rate to return to the target-consistent levels at the start of 2022, but to remain above the CBR targets up until 3Q22.