25 Apr 2018 16:00

Weekly inflation in Russia again 0.1%, no effect from ruble weakening yet

MOSCOW. April 25 (Interfax) - Russia had 0.1% inflation for the eight straight week in the week April 17-23, the Federal State Statistics Service (Rosstat) said.

Weekly inflation last departed from 0.1% for one week at the end of February, when it was zero. It was 0.1% in each of the three weeks before that.

Prices were up 0.3% in the first 23 days of April and up 1.1% since the start of the year.

Average daily price growth in the first 23 days of April was 0.014%, compared to 0.017% in the equivalent period last year. On that basis, inflation in annual terms was still 2.3%, as in the previous week, compared to 2.4% at the end of March (2.35% before rounding).

In other words, the ruble weakening that began on April 9 has so far not caused the expected acceleration in inflation. The regulator had said volatility on the Russian forex market could start affecting inflation in May.

Prices in the past week increased 1.5% for granulated sugar, 0.5% for millet and 0.2%-0.3% for mutton, rice, tea, vodka, salt, biscuits and hard candies.

Fruit and vegetable prices were up 0.2% on average, including increases of 2.8% for cabbage, 2.0% for carrots, 0.6%-1.0% form potatoes, tomatoes and apples, however cucumbers fell 5.2% in price.

Gasoline prices were up 0.4% and diesel fuel prices rose 0.5%.

Prices fell 0.8% for chicken eggs and buckwheat and 0.3% for frozen fish.

The Economic Development Ministry has raised its annual inflation forecast for April from 2.1-2.2% to 2.3-2.6%, the ministry said in its monthly monitoring report.

"The estimate for the rate of inflation in April is characterized by a relatively high degree of uncertainty, however it is most likely that the rate of price growth will be in the 0.3%-0.5% range month-on-month (2.3%-2.6% year-on-year)," the ministry said.

It said the ruble's devaluation in the first half of April would translate into inflation only if this proves to be robust.

"In the past year, exchange-rate pass through has fallen to 0.07-0.1, meaning that a robust 10%-ruble devaluation would add a cumulative 0.7-1.0 percentage point to inflation in the space of three months. Short-term ruble rate fluctuations are highly likely not to translate into price growth," the ministry said.

The ministry has submitted a draft revised forecast for 2018 to the Finance Ministry, which proposes revising the 2018 inflation forecast downward to 2.8% from 4% currently. The draft forecast is subject to revisions until mid-May, so the latest ruble weakening may result in the inflation forecast being moved back up.

The Russian Central Bank is not ruling out raising its inflation forecast although it may stay within the range of 3%-4%, First Deputy Governor of the Russian Central Bank Ksenia Yudaeva has said. "It [the inflation forecast] may be revised up slightly, although, in principle, last time we gave a relatively large forecast bracket for this year. We need to see, we will most likely keep the bracket," she said.

"Probably upwards [we will revise the inflation forecast], judging by recent events, judging by the latest inflation and exchange rate figures. By how much? It's difficult to say right now as the elasticity of inflation against the exchange rate has recently decreased and some additional assessments need to be conducted before we can talk more precisely about what the forecast will be," the First Deputy Governor said.

She said that target inflation remains unchanged at 4%.

In its March report of monetary policy, the Central Bank gave an inflation forecast for 2018 of 3%-4%.

Analysts told Interfax in a consensus forecast at the end of March that inflation would be 3.7% in 2018.