Bank of Russia sees prerequisites for further inflation slowdown – regulator

TASS Russian News Agency | May 17, 2019 at 11:49 AM

MOSCOW, May 17. /TASS/. The Bank of Russia does not rule out further slowdown of inflation amid a decline in the share of goods, which are rapidly going up in price, the regulator reported on Friday.

"The share of goods, which are most rapidly going up in price is shrinking and on the contrary - the share of goods with the lowest rates of price growth is increasing. This indicates the prerequisites for a further slowdown in inflation," the regulator says.

The regulator also notes that the local peak of annual inflation, which was mainly linked with raising of VAT rate, was passed in March, and in April annual inflation decreased by 0.1 pp, to 5.2%.

The regulator notes that the annual rate of price growth slowed down only in the category of non-food goods and services, while food inflation has not changed.

In April, a slowdown in annual inflation was observed in most Russian regions. However, food prices, in particular for fruits and vegetables, continue to make a major contribution to the regional heterogeneity of inflation.

Food inflation increased most noticeably in some regions of the North Caucasus and Siberia, while several regions of the European part of Russia and of the Far East registered its slowdown.

In its report the regulator also noted that the decisions of the Bank of Russia to raise the key rate in September and December 2018 contributed to the return of monthly consumer price growth rates to the level of about 4% in annual terms.

The Bank of Russia assesses the risks of secondary effects of the VAT increase as insignificant.

Earlier, the Bank of Russia lowered its forecast for annual inflation at the end of 2019 from 5.0-5.5% to 4.7-5.2%. The regulator also expects inflation to return to 4% in the first half of 2020.