Inflation in Russia in March 2010
So, the inflation rate has continued to fall: in March 2009, the CPI stood at 1.3%, while in March 2008 – at 1.2%. Between April 2009 and March 2010 the CPI in annual terms dipped to 6.5% from 7.2% during the month of February.
Meanwhile, it is worth noting that high rates of decline of inflation are explained largely by the base effect – inflation was on the rise in early 2009 due to depreciation of the Rb. It can be envisaged that this effect should loose its impact soon, as the second half of 2009 saw a drastic deceleration of inflation due to the stagnation of the aggregate demand and money supply. The economy currently sees renewal processes on the rise, the money supply grows promptly, which generates certain inflationary risks in the second half of 2010.
The inflation slowdown will most likely to continue over next quarter. But, with the economy back to the track of growth and money supply expanding (thanks to the Bank of Russia shouldering the Rb. exchange rate and monetizing the budget deficit), inflation should be gaining momentum. Meanwhile, the 2010 CPI will most likely to be lower than its 2009 figure.
P. Trunin, Head of the Department of Monetary Policy