Inflation steadily moderates

RUSSIA ECONOMICS - In Brief 13 Jan 2023 by Alexander Kudrin

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Rosstat reported that inflation in December reached 0.78% m-o-m, which is quite a low level given that the authorities moved the indexation of regulated tariffs from the summer months to December. Fruit and vegetable prices were the main drivers of the CPI in December. Inflation in 2022 as a whole reached 11.94%. On January 9 January inflation YTD was at 0.24%, which was much lower than over the same period in January 2022. Again, fruit and vegetable prices pushed CPI up, which is a seasonal effect. Prices for many other products either grew moderately or even fell. It looks as though inflation in January will moderate and may not exceed 0.7% m-o-m (versus 0.99% m-o-m in January 2022). If so, then inflation y-o-y may fall to 11.6% in January. It will then go down fast in February amid base effect (assuming other factors are equal, i.e., no more mobilization, an announcement of the next stage of the military operation, etc.). If current inflation trends remain unchanged, then in March, inflation may fall below 4%, and ahead of that, the CBR could consider quite a strong move concerning the key rate cut. The CBR BoD meeting will be held on February 10, and the magnitude of the rate cut will largely depend on inflation at the very end of January and early February. Evgeny Gavrilenkov Alexander Kudrin