Russia’s CPI continues to stabilize; inflation remained flat in May

The Russian State Statistics Service yesterday released the CPI data for the month of May. Russia’s CPI inflation remained flat at 7.3% y/y in May, on par with projections. On sequential basis as well, inflation remained flat at 0.4% and in line with expectations.

The inflation report for May suggests that inflation in Russia continues to stabilize and hence provides more confidence that the central bank will start a rate cutting cycle, beginning this week, said Commerzbank in a research report. The central bank is likely to lower its benchmark rate by 50bps this week, added Commerzbank. Even if the Bank of Russia could take more action, given the scale of real rates, the central bank is not expected to do so.

Russia’s deputy minister for economic development Alexey Vedev had stated that the annual inflation rate is expected drop to 6.3% to 6.5% by late 2016. Vedev told reporters recently that Russia’s inflation is likely to slow to 4.9% in 2017 and to 4.5% in 2018, Sputnik International reported in April. The ministry’s official forecasts indicate that the inflation will further decelerate to 4% by the end of 2019.