Russia: Inflation comes in at highest level in over one year in July
Inflation came in at 9.1% in July, up from June’s 8.6%. July’s figure represented the highest inflation rate since February 2023 but had been largely priced in by markets. Looking at the details of the release, faster price pressures for services outweighed a slower increase in prices for goods. As a result, overall price growth remained entrenched above the 4.0% target of the Central Bank (CBR) in June. That said, core inflation ticked down to 8.6% in July from June’s 8.7%, below July’s headline inflation.
Annual average inflation rose to 7.5% in July (June: 7.1%). Meanwhile, core inflation edged down to 8.6% in July from June’s 8.7%.
Lastly, consumer prices increased 1.14% in July over the previous month, following June’s 0.64% increase. July’s figure was the highest reading since April 2022.
Our panelists expect the disinflation process to return at the tail end of 2024 and continue in 2025; tighter monetary policy and a more favorable base of comparison will drive inflation down from current levels by end-year. That said, price pressures are seen outpacing the CBR’s target until 2028 due to by robust domestic demand growth and labor shortages.
Clemens Grafe, analyst at Goldman Sachs, commented:
“We think that the July print was the peak for annual inflation and inflation will slowly decline into the year-end. […] Though we believe that inflation will be falling more slowly than consensus expectations and the CBR’s forecast, we expect inflation to fall to 7.8% in Q4-24 and the CBR to remain on hold into next year at 18%.”