Russia's weekly consumer price inflation from February 26 to March 4 amounted to 2.2% week on week, up five-fold from 0.45% seen on the previous week, according to the latest data by RosStat statistics agency.

The February inflation print indicated an acceleration from 8.7% y/y to 9.15% y/y, with core CPI up to 9.7% y/y, Sova Capital reported on March 9.  

“The data did not give a meaningful signal considering the geopolitical risks. Weekly inflation as of 4 March was 2.2% w/w, implying a growth rate of 10.4% y/y. Should this rate continue in March, inflation could reach 10% m/m in March (19.3% y/y),” Sova Capital said in a note.  

According to the Ministry of Economic Development, non-food products drove the overall price increases (4.52% WoW) due to the ruble’s depreciation and increased demand, especially for cars (15.7% WoW), electrical and household appliances (11.66% WoW), and medical supplies (4.71% WoW). Food products were up 0.83% WoW due to fruits and vegetables, and regulated and tourist services were up 1.97% WoW due to outbound travel (28.67% WoW).

“Fewer goods amid disruptions in supply chains are likely to amplify the pass-through effect of the ruble’s depreciation. The re-pricing of existing products is likely to continue over the next several weeks, and we do not rule out that inflation could hit 20% by the end of March,” Sova Capital added.

As followed by bne IntelliNews, the avalanche of sanctions imposed on Russia is highly likely to result in a prolonged inflation shock and supply chain disruptions. The weekly jump in prices is already the sharpest weekly gain since it started tracking the data in 2008 and more than double the previous record, according to Bloomberg.

In February 2022 annual inflation stood at 9.2%. As of March 4, annual inflation is estimated at already 10.4% by the Ministry of Economic Development. The analysts surveyed by Bloomberg expect inflation to peak at 19%-20%, causing "one of the biggest inflation shocks in decades".

The central bank already doubled the key interest rate in 2021 from 4.25% to 8.5%, as it tried to catch up with inflation that remained persistently ahead of the 4% target and hiked it again to 9.5% in 2022. 

However, the military invasion of Ukraine has already led to an emergency key interest rate hike to record-high 20% to contain rapid ruble devaluation.  

"The ruble has depreciated nearly 50% since the end of February, and more than 340 companies have either suspended their operations/investments in Russia or have fully exited. Fewer goods amid disruptions in supply chains are likely to amplify the pass-through effect of the ruble’s depreciation," Sova Capital warned.

The analysts beleive that the next several months are likely to define the new trajectory, which could depend on the duration of the tensions in Ukraine; additional restrictions (if any); the speed at which the economy adapts to the new conditions; and how loose the fiscal and monetary policy stance is.