As w-o-w inflation remains high the government considers some administrative measures

RUSSIA ECONOMICS - In Brief 27 Jan 2021 by Alexander Kudrin

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Rosstat reported Russia’s inflation during the seven days ending January 25 remained at 0.2%, i.e., it was on average the same as w-o-w inflation in December and earlier in January. The y-o-y inflation in January will likely be close to 5.5%. A closer look at the breakdown of inflation components by the items of consumption basket shows that generally, prices increased across the board (from bread to cars) with rare exemptions, such as in the case of regulated utility charges and public transport tariffs. Although some prices grew faster than the others (for fresh vegetables, which is a seasonal effect, and medicines, for instance), inflation accelerated due to suddenly overheated demand. GKEM Analytica mentioned in the previous notes that an abnormal spending spree in November-December would result in higher inflation. Inflation accelerated due to the inability of the supply side to proportionally match the demand. The latter increased too much and within a short time frame. Hence inflationary spike looks temporary.Since the pandemic hit the country, Rosstat started providing more detailed inflation statistics based on a broader consumption basket. Rosstat reported, for instance, that costs of staying in 1-3 stars hotels generally didn’t change in January. However, staying in 4-5 stars hotels became 2.2% more expensive from January 1 to 25 (of which 0.5% originated during one week ending January 25).To contain inflation, the government decided to limit exports of agricultural products, such as grain. This decision looks very strange as imposing quotas and raising tariffs on grain exports cannot contain rising car prices (amid growing sales). Equally, this measure won'...