Inflation in Russia in 2010-2011

In mid-December, the RF Ministry of Economic Development raised its official forecasted inflation rate from 7-8% to 8.3-8.5%. 

Since last year’s beginning, by late December 2010 consumer prices had increased by 8.4%. Thus, the inflation rate had already surpassed the new floor established for the per annum growth rate of consumer prices.

In January 2011, a seasonal acceleration of inflation can be expected. Firstly, the year’s first month is traditionally the time for indexation of the tariffs established for the services rendered by natural monopolies and the housing and utilities sector, as well as the time for a hike in pensions. Secondly, the effect of last summer’s food crisis has not yet been overcome. Thirdly, the additional factors conducive to growth of prices will be an increasing money supply, high inflation expectations and rehabilitation of buyer activity.

As stated by First Deputy Chairman of the Bank of Russia A. Uliukaev, a decline of the growth rate of prices can be expected only in Q II 2011, when the food inflation will no longer exert the strong influence on the general consumer price index that was characteristic of late 2010.

N.V. Luksha – Candidate of Economic Sciences, Research Fellow of the Monetary Policy Department