Weekly consumer price inflation in Russia as of June 17 accelerated to 0.17% week on week (0.12% w/w a week earlier), according to RosStat, which would imply annual inflation growth of 8.5% year on year (after 8.3% seen in May). (chart)

At the same time in June, one-year inflation expectations of the population increased further by 0.2 percentage points to 11.9%, demonstrating upward dynamics for the second month in a row. 

As covered by bne IntelliNews, the board of the Central Bank of Russia (CBR) at the June 7 policy meeting resolved to keep the key interest rate unchanged at 16%, making a neutral rate decision for the fourth consecutive time. (chart) 

However, as inflation pressures continue to build up, the regulator is expected to significantly hike the interest rate already at the next July 26 policy meeting.

Renaissance Capital analysts warned on June 20 that while “some deterioration in inflation expectations more or less fits into the current unfavourable inflation picture, the marked acceleration of weekly inflation even now looks like an unpleasant surprise”. 

The analysts estimate that in July annual inflation will be around 9% y/y, which would be a “very uncomfortable level” for the CBR and could lead to the key interest rate increase of 1.5 percentage points to 17.5%.

Kommersant daily said in a separate report that the CBR indeed warned that it could significantly raise the key rate at the meeting on July 26, such as no noticeable slowdown in lending, growth in inflation expectations, continuous tightening of the labour market and acceleration of consumer activity.