Photo: Ekaterina Kuzmina / RBC
Inflation in Russia in February likely fell below 4% — the level at which plans to reach the Central Bank by the end of 2017, wrote the experts of Sberbank CIB. The reason for the slowdown in prices is weak demand, analysts say
Inflation in Russia in February could be below 4%, which the Central Bank wants to slow down the growth of prices in 2017. These findings are contained in the review of Sberbank CIB received by RBC. They are based on the data of Rosstat, according to which from the beginning of February prices increased 0.2% and the average inflation rate was 0.008% (in February of last year was 0,022%).
Judging by these statistics, says Sberbank CIB, inflation month-to-month likely fell below 0.4%, while the annualised price growth (the current level of monthly inflation adjusted seasonally adjusted and extrapolated to the year ahead) fell below 4%.
“If analizirana inflation has already fallen below 4%, it is logical to wonder how this will concern the Bank of Russia. To explain the deceleration of inflation by the mere strengthening of the ruble is impossible, as during the whole month the exchange rate of the national currency was relatively stable. In our opinion, the main reason for the decline in the rate of inflation is extremely weak demand,” the review says. Data on consumer activity in February Rosstat has not yet published, but in January, the retail trade turnover continued its multi-month drop, falling by 2.3% compared with January last year. The dollar in February hovered around 57 to 60 rubles, follows from the data Bloomberg terminal.
Inflation last year was 5.4% — the lowest level in the recent history of the country. In January, the growth rate slowed to 5%. However, several regions achieved the target of the Central Bank for inflation (4%), which the regulator expects to reach only to the end of the year. The regulator could discuss the issue of reducing the target level of inflation “, economic development and financial markets”, said the first Deputy Chairman of the Central Bank Ksenia Yudaeva.
The probability of a further slowdown of inflation in the absence of monetary stimulus further increases, analysts of Sberbank CIB. “From the point of view of IMF low inflation (about 2% in annual terms) can be more dangerous than high because it can turn into deflation, reliable recipes combat which is not” — said in the review. The authors have “no doubt” the achievement of a four percent target, but the question is, “will the Bank happy, if inflation is even lower, and whether he thinks the threat of low inflation the real.”
The slowdown comes on the eve of the meeting of the regulator’s monetary policy, which will be held March 24. At the last meeting on 3 February, the regulator decided not to reduce the key rate — he keeps it at 10% since September 19 last year (when it was reduced by 50 b.p.). In the course of three meetings last year, the Central Bank made the rate cut in the first or second quarter of 2017, however, in early February reported that its reduction potential in the first half of the year will be reduced by the “changes in external and internal conditions.” This happened on the background of the Finance Ministry, which in February began to buy foreign currency on the open market due to windfall profits from oil more than $40 (this price is included in the budget). The aim of the actions of the Ministry of Finance — the suppression of excessive volatility of the ruble. Purchasing agent currency was the Central Bank, however, told RBC sources, this function may pass to the Federal Treasury.