Russia: Inflation hits 16-month high in June
Inflation came in at 8.6% in June, up from May’s 8.3%. June’s figure marked the highest inflation rate since February 2023 but fell slightly short of market expectations. Looking at the details of the release, faster price pressures for food goods and services outweighed a slower increase in prices for non-food goods. As a result, overall price growth remained entrenched above the 4.0% target of the Central Bank (CBR) in June. Moreover, core inflation ticked up to 8.7% in June, outpacing both May’s 8.6% and June’s headline inflation.
Accordingly, the trend pointed up, with annual average inflation coming in at 7.1% in June (May: 6.6%).
Finally, consumer prices increased 0.64% over the previous month in June, moderating from the 0.74% increase seen in May.
Price pressures are forecast to recede from current levels on average by end-2024 on tight financing conditions. That said, rising inflation expectations, robust domestic demand growth and labor shortages will keep inflation above the CBR’s forecast of 6.5–7.0% this year and 4.0% target until at least 2027.
Clemens Grafe, analyst at Goldman Sachs, commented:
“The headline print surprised our forecast to the downside, as we had incorporated an adjustment to utility prices which was due to come into effect in July but which the weekly inflation prints had already picked up on in June. We estimate that this could add up to 0.5pp to headline inflation and now expect this to be picked up in the July print next month instead.”