Inflation expectations reverse their decline in March
Household inflation expectations in March were level with February (7.9%). Companies revised upwards their price growth projections. This was particularly true of retail, which was marked by elevated demand, according to the Bank of Russia’s commentary ‘Inflation expectations and consumer sentiment’.
Households were surveyed in early March, i.e. prior to the weakening of the ruble. While household-expected inflation remained unchanged, the inflation rate households observed in March continued to decline to reach again an all-time low (8.3%), which was for the first time recorded back in April 2018.
Business surveys suggest deteriorated forecasts for price movements. Most sectors cite expectations for accelerated price growth in the next three months. Retail emerged as the sector where expectations were elevated at most against the background of higher demand. Companies are expecting prices to increase as a result of a weaker ruble, higher demand for several product categories and rising production costs.
There was also a rise in inflation expectations of financial market participants. The expected inflation estimate, based on OFZ-IN bond prices, was upwards of 4% on some days in the month for the first time since May 2019.