Slowdown in annual inflation continues into July as growth in utility prices slows

In June 2019, annual inflation continued to slow down, notes the latest release of the Bank of Russia’s information and analytical commentary Consumer Price Trends. The annual rate of inflation came in at 4.6%, which is 0.1 pp lower than June.

A reduction in utility price growth emerged as the key factor driving down the rate growth, which comes as a result of lower indexation than one year prior. This is the second of the two indexation stages, with the first one, in January, having been linked to the VAT hike.  Annual food inflation was unchanged vs June. There was slight growth in prices for non-food goods, largely on the back of the base effect in motor fuel price trends.

To a great extent, change in consumer prices in July was driven by one-off and administrative factors. The monthly increment in prices for goods and services, excluding such volatile / regulated components as oil products and utility services is estimated at 0.3% (seasonally adjusted). This mark was typical of the February to June period (excluding May). The non-homogeneous character of inflation was determined by different changes in utility prices and food prices across Russian regions.

According to the Bank of Russia’s forecast, given the current monetary policy stance, annual inflation will return to 4% in early 2020.