Russia's inflation reaches critically low level

Russia's inflation reaches critically low level

Russia's annual inflation reached 2.5-2.6%, the head of the Russian Ministry of Finance Anton Siluanov said, speaking at the Financial University forum.

"Our inflation is quite low - 2.5-2.6% (in annual terms)," TASS cited him as saying.

The minister said that at the moment Russia needs to form its own economic agenda, without being distracted by sanctions. According to him, this agenda is simple: to ensure continued economic growth.

The head of the Ministry also expressed confidence that economic growth could exceed 1.5% per year only if structural changes are implemented and additional incentives are introduced that would guarantee the quality of growth.

Russia weekly inflation of the period from November 14-20 reached zero, although a week earlier, there was a price increase of 0.1%. Since the beginning of the year, consumer price growth has reached 2%. At the same time, in the comparable period of the previous year (from November 15 to 21) the statistical department noted inflation of 0.2%. Accordingly, in annual terms, inflation on November 20 fell to 2.4%.

Chairman of the State Duma’s Financial Market Committee, Anatoly Aksakov, speaking with Vestnik Kavkaza, noted that in the first place such low inflation level was caused by the Central Bank's rigid monetary policy. "The coordinated actions of the government and the Central Bank helped: the tariffs of natural monopolies were tightly regulated by the 'minus inflation' principle, when the growth of tariffs is kept below the level of inflation. The good harvest of the current year also had an impact: it affects the consumer basket, which is taken into account in calculating inflation," the expert said.

The Central Bank estimates annual inflation of 2.5% as a temporary phenomenon, he said, since a large crop is a "short-lived" factor. "The fact is that the decline in interest rates depends, among other things, on the reduction of the key rate, and not only on the level of inflation," the chairman of the State Duma’s Financial Market Committee noted.

"But there may be deflation factors associated with a decrease in demand for products. The Central Bank needs to take it into account and and reduce the key rate as soon as possible in order to prevent the development of deflation," he warned.

"I think that the Central Bank is controlling the situation, and they together with the government will jointly act in order to ensure the inflation level of 4% - the Central Bank set it as a target," Anatoly Aksakov concluded.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, in turn, noted that the decline in inflation was influenced by several factors, including the strengthening of the national currency, increasing oil prices, increasing budget revenues, the Central Bank's tight monetary policy, a high key rate, limited rate of money growth, a good harvest and adherence to the regulated tariff regime.

According to him, such a low level of inflation is a good signal for the population: this means that their living standards will not at least deteriorate.

The expert noted that the current trend does not allow to expect a significant increase in inflation. "Only some extraordinary factors can raise it significantly," the head of the department of stock markets and financial engineering noted.

"I do not expect high inflation or deflation. In my opinion, the situation will not change much. Yes, there will be inflation fluctuations, but within the Central Bank's target," Konstantin Korishchenko concluded.