Sliding vegetable prices cause annual inflation slowdown

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In June 2018, annual inflation dropped to 2.3% from 2.4% seen in March, April and May. The drop was caused mainly by declining vegetable and fruit prices. The estimate is presented in the current issue of ‘Consumer Price Dynamics: Facts, Assessments and Comments’, a BoR commentary.

June 2018 saw a major fall in vegetable and fruit prices as compared to June 2017: they declined by 9.8%. Certain vegetables and fruit became significantly cheaper. Prices for cabbage decreased by 34%, for onions – by 28.5%, for potatoes – by 27%, for fresh tomatoes – by 7.4%, and for grapes – by 4.6%.

Lower annual inflation resulted from the base effect. Back in early summer 2017, vegetable and fruit prices experienced a prominent rise triggered by unfavourable weather conditions. This year’s situation is substantially better.

In June, inflation accelerated slightly for non-food products and services. The former was still affected by petrol prices. The latter was driven by a one-off factor – 2018 FIFA World Cup. Stronger demand for transportation and hotel services caused a slight price increase in those markets, however, prices will return to the usual levels in the near future.

According to Bank of Russia estimates, in 2018 inflation is set to be low and close to the target. By the end of the year, it will amount to 3.5–4%.

19 July 2018

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