Inflation trends down in May as short-term proinflationary factors taper off
In May 2020, annual inflation decreased by 0.1 pp to 3.0%, after its rise in March—April. This slowdown resulted from a decrease in food inflation. The previous two months recorded a significant rise in inflation driven by a surge in households’ demand for certain food products during their preparations for the self-isolation period. These findings are given in the information and analytical review Consumer Price Dynamics.
Specifically, the annual growth rate of fruit and vegetable prices considerably lowered, and the rise in meat and poultry prices decelerated. In the near future, food inflation will be contained by a high supply of food products and expected good harvest of a range of crops.
The annual growth rate of non-food prices remained unchanged. The annual growth of service prices slightly sped up, returning to its February—March level. The volatility of service prices increased a little, which is largely the result of statistical issues since the suspension of multiple services due to the restrictions makes it difficult to measure prices. As the service sector resumes its normal operation, service prices may be expected to become less volatile.
Annual inflation slowed down in a large part of Russian regions, with the regional heterogeneity of price movements decreasing.
Overall, the effect of short-term proinflationary factors has been mostly exhausted. In the near future, the monthly growth rates of consumer prices will continue to decline, being dragged down by weak demand, which will contribute to a further deceleration of inflation. Concurrently, annual inflation may increase over the remainder of the year since the low readings recorded in 2019 H2 will be excluded from the inflation calculation. Given the current trends, annual inflation as of the year-end 2020 is more likely to trend towards the lower bound of the