Record crops send inflation lower

The substantial slowdown in inflation in the first month of autumn was mainly triggered by tailwinds of a temporary nature including bountiful crops and a stronger ruble, according to the new issue of ‘Consumer Prices’, a regular BoR information and analytical commentary.

The record crops (cereals, beans and sugar beet) brought about a noticeable decline in the annual growth of food prices. The base effect was also a factor: due to delayed harvesting, the delivery time of some crops shifted to September.  As a result, prices on fruit and vegetables fell by 2.4% against 2016.

The downward trend in the annual pace of non-food prices continued in September, in part on the back of a stronger ruble. However, there was a certain acceleration in the prices of services (largely due to upward movements in education sector prices). This trend may suggest consumer willingness to ramp up costs is growing.

The current inflation dynamics is paving the way to further declines in inflation expectations. They changed little if at all in September compared to August and stayed at their historical lows.

The Bank of Russia’s inflation forecast for the end of this year may be revised downwards. However, the Bank of Russia estimates that December’s inflation will not fall below the current readings. Moving forward, as the effects of temporary disinflation factors run their course, inflation will fluctuate near 4%. In pursuing its monetary policy, the Bank of Russia will take into consideration the medium-term risks of inflation deviating in either direction.