Inflation expectations stabilise in May

Inflation expectations of economic agents have changed insignificantly for the second month in a row, holding at an elevated level. Meanwhile, household expectations remained virtually unchanged in May, whereas the price expectations of businesses continued to decline, though at a slower pace. Analysts’ predictions remained virtually unchanged. This is evidenced by data provided in the latest Bank of Russia commentary ‘Inflation Expectations and Consumer Sentiment’.

The share of respondents who believed that price growth over the past month was very strong continued to shrink in May. The rise in the prices of such frequently purchased goods and services as eggs, bakery products, utility services and transport fares was less frequently perceived as considerable.

This is consistent with the statistics, which suggest that the month-on-month growth of these prices has slowed. Thus, households have noticed that the temporary surge in inflation seen at the beginning of the year is currently fading. Price expectations for the next month have become more positive. This is partially associated with seasonality: the prices of fruit and vegetables usually go down in summer.

Businesses’ expectations improved somewhat in May, while those of analysts remained virtually unchanged. According to a survey of businesses by the Bank of Russia, in May, companies’ price expectations for the three months ahead continued on the downward trend observed since February. The decline was registered across all industries and regions, pointing to a weakening in the effect of a common factor — the VAT hike.