Russian inflation to be around 4% in 2020 with little deviation as exchange rate stabilizes to 2020 - Belousov
MOSCOW. Nov 20 (Interfax) - The Russian government's 2020 inflation forecast of 3.8% is still relevant: the figure will be around 4% with little deviation either way as the exchange rate stabilizes, First Deputy Prime Minister Andrei Belousov told reporters on the sidelines of the Transport Week 2020 forum.
"For now we work on the assumption that firstly the [3.8%] forecast is not out of date," he said when asked how relevant the government's 2020 inflation forecast is, given the recent acceleration of consumer price growth.
"We now think inflation will be in the region of 4% [for 2020]. There will be some +/-, but not very much, because the exchange rate has stabilized," Belousov said
Russia had inflation of 0.2% for the week November 10-16, the Federal State Statistics Service (Rosstat) said. Inflation was 0.2% the previous week also and had been 0.1% for five straight weeks prior to that.
Consumer prices were up 0.4% in the first 16 days of November, more than the 0.3% by which they had risen in the whole of November 2019. They rose 3.7% since the start of this year, just below the government's 3.8% forecast for 2020, which looks like being met next week.
The 0.2% weekly price growth - 0.15% before rounding in the past week - is a substantial figure: weekly inflation had not exceeded 0.1% since the beginning of July 2020, when regulated service charges went up.
Average daily inflation in the 16 days of November was 0.022%, up from 0.011% in the same period last year. If the trend persists until the end of the month, inflation for November could be 0.7%, meaning that annual inflation would accelerate to 4.3-4.4%.
Based on Rosstat's data, annual inflation quickened to 4.2% or 4.17% before rounding as of November 16, from 4.1% or 4.12% on November 9 and 4.0% or 3.99% at the end of October.
Annual inflation had not been as high as 4.2% since September 2019. It is now at the upper end of the Central Bank's forecast range of 3.9%-4.2% for the year, leaving the regulator less room for maneuver at its December rate-setting meeting.
There is still some room to reduce the Central Bank's key rate, though not by much, Kirill Tremasov, Director of the Central Bank's Monetary Policy Department, said on November 19.
"There is still some room for a further rate cut, yes indeed, and we see it; however, it is of course unlikely to be by very much. Realizing this potential will depend on many factors, such as on the trajectory of economic recovery, as well as on how quickly the gap between the current volumes of production and output potential narrow," Tremasov said.
Tremasov reiterated that monetary policy would remain soft in 2021; however, he stressed that one must remember that sooner or later, the monetary policy would normalize, and the key rate would return to a neutral level that the regulator now estimates at 5%-6%.
"One needs to understand that after all, the normalization of monetary policy, the return of the rate to a neutral range in other words, this normalization is inevitable, and it will begin as soon as inflationary risks start to appear in the economy, meaning as soon as the output gap begins to narrow," Tremasov explained.
The CBR expects inflation in Russia to be 3.9%-4.2% by the end of 2020. "The upper limit of this range has already been reached as at mid-November. We now see the rather short-term impact of certain pro-inflationary risks associated with the effects of the weakening ruble pass-through to consumer prices as well as the impact of global prices on foodstuffs," the CBR department director said.
Tremasov stressed that these are short-term effects, and disinflationary trends are likely to prevail in 2021 according to the Central Bank's estimates, primarily because of the beginning of budget consolidation.
The regulator's 2021 inflation forecast is 3.5%-4%.