Russia’s Inflation Peak Behind Us – What’s Next for the Central Bank?
Cairo: Hani Kamal El-Din
Recent inflation data from Russia suggests that the country has moved past its inflation peak, with figures coming in lower than both market expectations and weekly estimates. This decline is largely attributed to a sharp slowdown in price growth within the services sector. According to Alexander Isakov, an economist at Bloomberg Economics, these trends may encourage the Central Bank of Russia to keep its key interest rate unchanged in February, provided that January’s inflation data does not exceed forecasts.
Key Data Highlights:
Figures released by Rosstat (Russia’s Federal State Statistics Service) on January 15 revealed that consumer inflation in Russia rose by 0.13% week-on-week as of January 13 and by 0.67% since the start of the year. In December, the Consumer Price Index (CPI) increased by 1.32% month-on-month and 9.52% year-on-year, while the core CPI rose by 1.02% monthly and 8.93% annually.
Services Sector Slowdown:
The services sector experienced a significant deceleration in inflation during December, dropping from 1.3% month-on-month in November to just 0.2% in December. This marks the second-lowest December figure in the history of Russian inflation statistics. The slowdown was driven by a 0.15% month-on-month decline in transport service prices, following a 2.6% increase in November, as well as a moderation in communication service price growth to 0.3% month-on-month, down from 6.8% in the previous month.
Drivers of Inflation Slowdown:
Transport and communication services were the primary drivers behind the inflation slowdown. However, these sectors are highly seasonal, meaning price growth could accelerate again in the coming months. Despite this, the Central Bank of Russia is likely to view December’s figures as validation of its recent decision to maintain the key interest rate at 21%.
Future Outlook:
If January’s inflation data aligns with expectations, the Central Bank is expected to hold the key rate steady in February. However, forecasts suggest that Russia’s consumer inflation will only slow to 5–6% year-on-year by the end of 2025, exceeding the Central Bank’s current projection of 4.5–5.0%.
