January inflation held at the lower bound of Bank of Russia forecast

As expected, annual inflation in January rose and reached 5%, which is consistent with the lower bound of the Bank of Russia’s forecast, according to the latest issue of ‘Consumer Price Dynamics: Facts, Assessments and Comments’, a commentary.

This acceleration was driven primarily by a number of impactful supply-side factors in several food products as well as the final stages of price adjustment to the weakening in the ruble in the second half of 2018 alongside the base effect. The VAT rise contribution is considered below the estimated level. The full scale of this driver’s impact on inflation will not be gauged until April.

In January, inflation developments varied considerably across regions due to differences in the consumer basket structure, uneven price adjustments, and a number of specific factors.

The Bank of Russia forecasts that annual inflation will return to 4% in the first half of 2020 when the effects of the ruble’s weakening and the VAT rise peter out.