Inflation expectations of Russians hit all-time low in August

With the new harvest entering the market, the increasingly more affordable vegetables and fruit helped slow down overall inflation expectations of households in August 2017. An inFOM survey commissioned by the Bank of Russia suggests that direct estimates of households’ inflation expectations were at an all-time low in August 2017.

The data suggests that the trend towards a decline in observed inflation estimates, which first emerged back in the middle of 2016, remains unchanged. However, the readings for expected inflation and observed inflation are still above the Rosstat-posted estimate. Provided that monetary conditions remain moderately tight, inflation anchored close to the 4% target is set to foster a further reduction in inflation expectations.

The lower inflation readings sent consumer sentiment upwards. Respondents were more positive in their perceptions of changes in their financial standing over the year. Accordingly, they less frequently cited the need to save on everyday expenses. Products and services that were mentioned as increasingly affordable included meat and poultry, cheese and sausage, clothing and footwear, fish and seafood, fruit and vegetables, confectionary products, and restaurants and cafes.

Improvements in financial standing had a positive effect on households’ positions on savings. The proportion of respondents that were able to save within the last month was back to the levels seen in mid-2014 (when respondents were first asked the question) following a significant drop.