Russia’s deflation holds for another week and m-o-m deflation in August could be around 0.6%

RUSSIA ECONOMICS - In Brief 01 Sep 2022 by Alexander Kudrin

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Rosstat reported that in seven days ending on August 29, consumer prices fell by 0.16% w-o-w. The MTD deflation reached 0.54%. It brought down the YTD inflation to 10.38%. In recent weeks deflation was caused primarily by seasonally falling fresh fruit and vegetable prices. Though some other food prices, such as cereals, were also falling. Prices for many other items in the consumption basket started to rise slowly. Hence deflation may continue for a few weeks more. In August, Rosstat may report deflation of around 0.6% m-o-m, and the y-o-y inflation may go down 14.2%. By year-end, inflation can fall to about 12%, which may not be too far from rising inflation in the EU and some other developed countries. A narrowing difference between Russia’s inflation and inflation in the “unfriendly” jurisdictions softens the effect of the ruble’s appreciation against major (and, regrettably, “unfriendly” currencies) in real terms. Though, the ruble currently remains too strong – both in real and nominal terms. Evgeny Gavrilenkov Alexander Kudrin