Basic vegetables cheaper by more than quarter in August

Rapidly declining food prices, mainly those of vegetables, emerged as a key reason behind the slowdown in inflation in August. The price for staple vegetables (potatoes, cabbage, onions, beetroots, carrots and garlic — the so-called ‘borsch set’) dropped more than 25%, according to the new issue  of ‘Consumer Prices’, a regular BoR information and analytical commentary.

Other food categories beyond fruit and vegetables were also trending down, albeit more softly. This development comes as a result of the slower rising growth of prices for meat, milk and dairy produce. Their outputs have been on the rise thanks in part to government support. A definite contribution to the decline came from a number of food products including prices on sugar, cereals and legumes, which were down on last year.

In non-food categories, the decline in annual price growth rates continued, helped by a stronger ruble and demand limitations. Services saw their price growth settle around 4%.

The marked decline in inflation between July and August is testament to flagging short-term inflationary pressures. This trend in prices is set to pave the way for a further decline in inflation expectations, which, due to sensitivity to price movements in individual food categories, have yet to be linked to the inflation target. Fluctuations in the fruit and vegetables market can fuel proinflationary effects.

In pursuing its monetary policy, the Bank of Russia will take into consideration both short- and medium-term inflation risks including those stemming from the inflation expectations of market players.