Inflation expectations for year ahead drop to lowest point since March 2021 in June - CBR

MOSCOW. June 27 (Interfax) - Inflation expectations in June on an annual horizon are down to their lowest level since March of 2021, the Central Bank of Russia (CBR) said in a commentary.

The median estimate for annual inflation was 10.2% in June, down 0.6 percentage points from May and 1.3 pp lower than the average for Q1 2023, an inFOM LLC survey showed.

Like inflation expectations, observed inflation in June is the lowest since March 2021. Estimates of observed inflation declined among respondents both with and without savings.

Respondents' concerns about rising prices for most goods covered by the survey form decreased in June. The biggest decrease was in the share of respondents who reported steep price growth for housing and utility services, medicine and eggs.

However, concerns grew about rising prices for gasoline, as well as sugar and salt. Judgmental estimates of expected inflation in June decreased for the month ahead but rose for the year ahead. Judgmental estimates of actual inflation in the preceding month and year decreased, the CBR said.

Respondents' inclination to spend increased in June, the CBR said. The share of those who prefer not to save available money and would rather spend it on expensive goods grew by 2.9 pp from May to 31.4% in June, the highest figure since October 2018. The share of those who prefer to save shrank by 2.6 pp to 51.1%.

Estimates of how favorable the current moment is for making large purchases included in the calculation of the consumer sentiment index also rose, increasing to their highest level since March 2020.

Respondents' higher inclination to consume also affected their preferences for how to hold their savings. The share that prefers to keep savings in liquid cash form rose to 33% in June from 31%, while the share of those how prefer a bank account shrank to 37% from 42%.

The CBR forecast that annual inflation will continue to accelerate in the next few months as price pressure increases and the low monthly inflation figures for the summer and fall of 2022 are no longer factored into calculations. Taking into account the monetary policy being pursued, annual inflation in Russia will be in the range of 4.5-6.5% in 2023 and close to 4% in 2024 and thereafter, the CBR forecast.