Global
2 years ago

Russian consumer inflation accelerates in May

Published :

Updated :

Annual inflation in Russia accelerated in May, data from the state statistics service Rosstat showed on Friday, after the central bank said rising inflationary pressure was increasing the likelihood that it may need to hike interest rates.

Inflation soared to double-digits soon after Russia started military drive in Ukraine last year. Due to that high base effect, annual inflation in Russia has dropped below the central bank's 4 per cent target in recent weeks, but is now climbing once more.

Annual inflation started accelerating in May after 12 months of decline, Central Bank Governor Elvira Nabiullina estimated on Friday. The bank held interest rates at 7.5 per cent, but issued its strongest signal yet that it may hike interest rates this year.

“The key factor is consumer demand," Nabiullina said. "It is fuelled on the one hand by actual and expected wage growth in a tight labour market, and on the other by a marked expansion in lending.

“The propensity to save is gradually decreasing."

In May, annual inflation stood at 2.51 per cent year-on-year, up from 2.31 a month earlier, the data showed. Analysts had expected inflation at 2.4 per cent.

On a monthly basis, the consumer price index (CPI) rose 0.31 per cent in May after a 0.38 per cent increase in April, the data showed, coming in line with analysts' expectations.

Separate Rosstat data released on Wednesday showed consumer prices rose sharply at the start of June.

The central bank sees inflation ending this year at 4.5 per cent-6.5 per cent and is determined to bring price rises back to its 4 per cent target in 2024.   

Analysts polled by Reuters believe persistent inflation risks will prevent the central bank from trimming its key rate this year, and expect marginal economic growth.

Russian households regularly cite inflation as a key concern, with many having no savings after a decade of economic crises while rising prices dragged living standards down across the country.

Share this news