CBR analysts see Oct-Nov easing of inflationary pressure as temporary, pro-inflationary risks dominating in medium-term

MOSCOW. Dec 8 (Interfax) - The easing of inflationary pressure in Russia in October-November is temporary, the Central Bank of Russia's (CBR) research and forecasting department said in a bulletin on current trends.

"The influence of certain disinflationary factors, foremost the record grain harvest and the generally positive dynamic of production in the agribusiness sector, could turn out to be more protracted than previously thought, but pro-inflationary risks predominate on the medium-term horizon both on the side of supply (ongoing restrictions) and demand ("overhang" formed due to savings)," the CBR analysts said.

The slower rate of consumer price growth continued in November, despite a faster increase in prices for certain fruit and vegetables than presumed by seasonality, they said.

"This was facilitated by the disinflationary post-mobilization effect from the temporary decrease in demand, which has now virtually disappeared. At the same time, amid positive budget and credit stimulus, one can expect an increase in inflationary pressure," the report said. The pro-inflationary effect could be offset by continued high savings rates, the analysts reckon.

"Now people are inclined to save more, despite signs of acceleration of the growth of nominal and real wages. However, the high savings rate currently reflects the preference of liquidity, the need to create a financial safety cushion (including in cash form) more than it does the increased appeal of savings in the form of bank deposits or other financial instruments (as was the case when interest rates were raised in the spring). Therefore, the current high savings rate is unstable and could decrease," the analysts said.