Inflation continues to slow down in May

Annual inflation continued to decline in May to 5.1% from 5.2% a month earlier. The slowdown in price growth rates was registered in most Russian regions, notes the latest issue of Consumer Price Dynamics: Facts, Assessments and Comments.

The statistical high base effect in the market of motor fuel made a considerable contribution to the slowdown in annual inflation (last year its prices rose significantly). The ruble’s strengthening since the start of the year also had a temporary disinflationary effect.

However, growth in food prices accelerated in May. Annualised food inflation increased in May by 0.5 pp, to 6.4%. This is largely associated with faster growth of fruit and vegetable prices on the back of the statistical low base effect (a year earlier, one-off factors resulted in a price downturn atypical of this month). The Bank of Russia expects that price growth rates in this segment will stabilise as the new harvest comes in.

According to the revised Bank of Russia forecast, inflation will be lower than expected this year at 4.2-4.7%. It will further hold near 4%.