Inflation sped up in March amid temporary demand increase and ruble depreciation
Annual inflation increased by 0.2 pp in March vs February to 2.5%. This was driven by the ruble depreciation and a temporary increase in demand due to the spread of the coronavirus, notes the new issue of the Consumer Price Dynamics, information and analytical commentary of the Bank of Russia.
Prices for food products that people were buying in advance for the lockdown (poultry, cereals and pasta, potatoes) rose most notably compared to February. Prices for cleaning products and medicines also accelerated. Despite the general rise of inflation, the growth rates of prices for certain food products that account for a significant share in the household expenditure structure remained negative. For instance, the above-mentioned poultry, sugar, fruit and vegetables are still cheaper than in the previous year.
The lockdown has influenced service prices as well. While the demand for such services as transportation went down on the back of self-imposed isolation, the demand for paid medical services, for example, rose. As a result, the average growth rate of service prices in March was unchanged.
Inflation will return to the Bank of Russia’s target from the low levels of the recent months faster than previously forecast. However, the restrictions being implemented both in Russia and abroad, a drastic and long-lasting decline in the global economy, as well as the impact of an increased uncertainty and the tightening of monetary conditions on domestic demand will become significant disinflationary factors in the mid run. The Bank of Russia will comprehensively analyse the influence of the current developments on the medium-term forecast of inflation, inflation expectations, and economic prospects.