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Russia Inflation Picks Up as Central Bank’s Tone Hawkish

Russia Inflation Picks Up as Central Bank’s Tone Hawkish

Inflation accelerated in Russia, dimming hopes that price growth would begin to subside and fueling expectations the central bank will make another big increase in its key interest rate next month.

Consumer prices rose 0.18% in the week ended Nov. 15, double the rate the previous week but still below the pace seen in October, the Federal Statistics Service said. Economic growth in the third quarter came in at 4.3%, the statistics service said, a bit weaker than the 4.5% expected by economists surveyed by Bloomberg.

Russia Inflation Picks Up as Central Bank’s Tone Hawkish

The news followed a pair of hawkish statements from Bank of Russia officials this week. 

Kirill Tremasov, head of the monetary policy department, told a conference Wednesday that the central bank is determined to move “decisively” to bring inflation back to its 4% target next year. A “wide range” of options for rate moves will be on the table at the next meeting on Dec. 17, he said. Warning that pro-inflationary risks continue to dominate, he said food prices -- which have been a major driver of increases in recent months -- may continue to push up the rate next year, as well. 

He echoed comments on Monday by Governor Elvira Nabiullina, who warned of “serious risks” of an inflationary spiral taking hold as consumer expectations of more price increases grow. 

Holiday Demand

Natalia Orlova, economist at Alfa Bank, said the slowdown in inflation in the first week of November was apparently related to non-working days the Kremlin ordered for that period to combat Covid-19, not a lasting change.

“With the ruble volatility and high inflationary expectations, I think that holiday demand will start to appear soon and that could support elevated inflation pressure,” she said. “Inflation could be 7.8%-8.0% at the end of December.”

Price growth was 8.1% in October, the highest in five years, despite 325 basis points of interest-rate increases so far this year.

“I’m expecting a 50 basis-point hike in December and possibly another one in February,” said Irina Lebedeva, an economist at Uralsib. 

©2021 Bloomberg L.P.