Inflation is most likely to climb above 15–16%

A 12.2 % annual inflation is quite possible if the fiscal discipline is observed, stated Russia's Finance Minister Anton Siluanov.

Meantime, in February, inflation on an annualized basis reached 16.2–16.4%, of which near 10 p.p. were lost because of the ruble depreciation and so called trade constraints. However, the Finance Ministry hopes that a peak will be reached soon and then inflation will begin to decline.

According to our estimates, the effect of ruble depreciation late in 2014 early in 2015 will be translated into consumer goods prices for another few months, and within the same period the 12-month consumer price index (CPI) will gradually be increasing up to 18–20% by mid-2015.

In Q2 2015, the consumer price index may lose 4–5 p.p. if no more inflation ramp-up events occur, above all a new round of ruble depreciation. However, it is too optimistic to project 12.2% at 2015 year-end.

By the end of the first two months of 2015, the consumer price index probably reached 6% – half of the annul value estimated by the Finance Ministry will be reached within two months. According to our projection, the CPI is expected to increase 18–20% in H1 2015 compared to H1 2014, then inflation will slow down and reach 15–16% late in 2015 compared to that seen in December 2014.

Mikhail Khromov, the Director of Structural Research Center