The Ministry of Economic Development predicts inflation in March at the level of 0.3-0.4%. According to the Ministry, inflation will begin to accelerate in March due to high volatility in the foreign exchange market – up to 2.3-2.4% – from 2.3% in February. In March, inflation is projected at the level of 0.3-0.4% m/m, which corresponds to the range of 2.3-2.4% y/y. Thus, taking into account the observed volatility in the foreign exchange market, acceleration of annual inflation from current low levels may begin earlier than expected according to the review “The picture of inflation” of the Ministry of Economic Development.
In February 2020, inflation slowed down to 2.3% in annual terms after 2.4% in January, which corresponds to the lower limit of the estimation of the Ministry of Economic Development of Russia. Food inflation in February was 0.2% on a monthly basis after zero dynamics in the previous two months. Some acceleration in price increases in the food segment is due to trends in the fruit and vegetable market. However, despite the uneven monthly dynamics, the seasonal rise in prices for fruits and vegetables is slower than last year. As a result, annual inflation in the food products segment in February fell to 1.8% in annual terms after 2.0% in January.
According to the Ministry of Economic Development, a contribution to the acceleration of monthly inflation in February was made by an increase in the growth rate of prices for services (0.3% on a monthly basis after 0.2% in January), which was also associated with deferred indexation of tariffs for urban passenger transport in a number of large regions, as well as higher prices for a number of market communications services. At the same time, the annual growth rate of prices for services remained at low levels – 3.0% in February after 2.8% in January.
In February, the growth rate of prices for non-food products (excluding the seasonal factor) fell to record low levels (0.1% versus January after 0.2% in January, as in April-December 2019). In February, deflationary trends in the durable goods segment intensified: a decrease in prices in relation to the previous month (with the exception of the seasonal factor) was recorded for television and radio products, personal computers, communications, electrical goods and other household appliances. As a result, in annual terms, the growth of prices for non-food products slowed down to 2.3% after 2.5% in January.
“In the context of moderate growth in prices in the segments of non-food products and unregulated services, monetary inflation remains significantly lower than the Bank of Russia target (1.8% m/m SAAR and 2.3% y/y in February, after 1.5% m/m, respectively SAAR and 2.5% y/y in January)”, according to the Ministry of Economic Development.