Inflation Slowdown in Russia

In February the inflation rate in Russia, measured with CPI, reached 0.9%. 


This result is above that forecast by the RF Ministry for Economic Development, which was equal to 0.8%. However , the inflation kept going down: as a result of February 2008 the CPI made 1.7%, and in annual terms (over March 2008 – February 2009) the CPI reduced from 8.1% to 7.2% in current January.

We would like to note that high inflation slowdown rates are mainly accounted fro by the upsurge of inflation registered at the beginning of the previous year, which was caused by considerable ruble depreciation. At present growth of prices for consumer goods and services is limited with slow recovery of the demand. It should, however, be remembered that the increase of monetary supply is accelerated. In January money supply reduced as usual but the decrease rates turned out to be the lowest since 2004, which creates some inflation risks for the second half of 2010.

It seems that in the forthcoming months the inflation will continue to slow down in Russia. However, the budget expenses growing and the money supply recovering, the inflation will start to accelerate gradually. At the same time, in our opinion, the CPI will be lower in 2010 than in 2009.

P.V. Trunin – PhD, Head of Department of Monetary Policy