Prices in May outperform expectations

Consumer price growth in May remained moderate, helped by low demand and a stronger ruble. May saw annual inflation stabilising at its March-April readings (7.3%), beating the previously made assumptions for its potential rise.

The current inflation data for the last three months suggest that a further downward trend in the annual rate of price growth is likely, barring any unforeseen shocks. In recognition of these positive price movements, the Bank of Russia downgraded its forecast for inflation for the end of 2016 to 5–6%. However, pro-inflation risks remain in place.

The annual growth paces of food prices, albeit edging up, were muted in May, as compared to non-food prices. This was helped by the abundant supply of agricultural products and the dynamic advancement of import substitution in the food industry.

At the same time, the annual pace of increment of nonfood prices went down somewhat, with services showing a reading level with April.