MOSCOW (Reuters) – Consumer prices in Russia rose slightly for the seventh consecutive week at the start of November, data published on Wednesday showed, as the central bank tries to balance competing inflationary pressures across the economy.
Russia’s consumer price index rose 0.01% in the week to Nov. 7, the Rosstat federal statistics service said. That was down from a 0.07% rise in prices recorded a week earlier, a trend some analysts said was signs of weakening consumer demand.
Russia’s economy is caught between short-term disinflationary pressures – aggravated by the call-up of more than 300,000 reservists to support Moscow’s military operations in Ukraine – and longer-term trends that are likely to see prices rise, the central bank has warned.
Last month it signalled an end to its rate-cutting cycle, as it held its key rate at 7.5%, completing a series of aggressive cuts that returned the rate to pre-February levels. The regulator had hiked rates to 20% after the West imposed sweeping sanctions on Moscow for sending tens of thousands of troops into Ukraine on Feb. 24.
The central bank targets inflation at 4%.
Since the start of the year, prices have risen by 10.67%, Rosstat said. At the same point in 2021, year-to-date inflation was running at 7.51%.
High inflation has for years been a concern for Russian households as it dents their spending power and eats into living standards. Poverty rates are relatively high in Russia and surveys show more than half of all households have no savings.
Consumer expectations for future price rises have grown recently and Russia’s partial mobilisation could stoke longer term inflation due to its impact on the labour force, the central bank said last month.
Analysts have warned Russia’s mobilisation may stymie the economy’s fragile recovery.
The central bank said it will likely be disinflationary in the short-term due to the hit to consumer spending, and economic data for October has already showed deepening falls in retail sales, economic output and business confidence.
“The main reason behind the downward trend of inflation is the weakening of consumer demand,” said analysts at Alfa Bank. “Sluggish consumer demand will be an important factor in reducing inflation risks in the coming months.”
(Reporting by Darya Korsunskaya and Jake Cordell; Editing by Kirsten Donovan)
