Russia’s consumer price inflation in February 2024 accelerated posted 0.68% month on month and accelerated to 7.7% year on year from 7.4% y/y seen in January, according to the latest RosStat data. (chart)

To remind, in 2023 the CBR was forced to play catch-up with persistently high inflation: in less than five months the key rate has more than doubled from 7.5% to 16%. But in February the CBR kept the key rate flat, making the first neutral key interest rate decision since July 2023. 

Renaissance Capital commented that inflation in February exceeded expectations and estimated the seasonally adjusted m/m price growth at 0.5%, implying annualised inflation for the last 3 months (one of the indicators targeted by the Central Bank of Russia) at 6.4% y/y. 

The key contribution to price growth in February was made by services, which may indicate a "catch-up" price growth of the latter, the analysts commented.

The first weekly data from March showed that price growth slowed to 0.0% week on week on the week ending on March 11 (after 0.1% w/w seen in the previous three weeks), which, according to the Ministry of Economic Development, implies that annual inflation will remain at 7.7% y/y. 

“The data of the first ten days of March indicate a decrease in inflationary pressure. However, it is too early to speak about the stability of this trend,” RenCap notes.

The consensus expectations of analysts compiled by the CBR expects inflation at 5.2% y/y at the end of 2024, with an average key rate of 14.5% during the year (versus 4.9% y/y and 13.9% in the previous February survey). 

“We expect the [Central] Bank of Russia to keep the key rate unchanged at 16% at its meeting on 22 March and to start easing monetary policy in June. The key rate may fall to 10% at the end of the year,” RenCap analysts believe.