Good crops and strong ruble add to lower inflation

January saw an annual inflation drop to 5% which is in line with the Bank of Russia forecast to reach the 4% target by 2017 end. A low price dynamics is partially attributed to temporary factors including good crops and a stronger ruble, the Bank of Russia current issue of information and analytical commentary ‘Consumer Prices Dynamics’ states.

Last year’s good crops add to a slower price growth or to lower prices for sunflower oil, cereals, sugar, fruits and vegetables. In its turn, a stronger ruble restrains price growth for quite a number of goods and services including electronics and household appliances, and international tourism services. At the same time, the commentary states that the depletion of temporary factors can slow down a decline in inflation.

Pro-inflationary risks are based on expectations for higher inflation which are still alive. Overestimated households’ inflation expectations can partially be explained by higher prices for some socially important goods and for dairy products in particular. Although stabilised to match the global dynamics, dairy products prices continue to rise. Moderately tight monetary policy pursued by the Bank of Russia will add to a decline in inflation to reach its target level.