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Russia inflation rate: Double-digit price rises set to slow despite forecast interest rate cuts

By Mensholong Lepcha

Edited by Alexandra Pankratyeva

11:19, 23 August 2022

Inflation growth
Why is Russia's inflation rate so high? Photo: Dilok Klaisataporn / Shutterstock

Russia’s inflation rate came in at 15% in July 2022 – way above the Russian central bank’s target of 4%.

However, data indicated that inflation has peaked in Russia as inflation rates decreased for the second month in a row helped by lower fruit and vegetable prices. 

Lower inflation expectations have given policymakers in Russia extra room to cut interest rates to stimulate economic activity in the country hurt by the war against neighbouring Ukraine.

In this article, we talk about the inflation rate in Russia and central bank policies. You will also find important information on the interest rate outlook and Russia’s inflation forecast.

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What is the Bank of Russia?

The Bank of Russia is the country’s central bank. The bank’s primary function is to issue and ensure the stability of the Russian ruble.

According to its official website, the Bank of Russia in collaboration with the Government of the Russian Federation conducts state monetary policy. Other functions of the bank include foreign exchange regulation, supervision of the national payment system, and a last-resort creditor for credit institutions.

In 2013, the Bank of Russia was also given powers to regulate and exercise control over financial markets.

The Bank of Russia has a board of directors composed of a governor and 14 board members. Members are appointed by the Lower House of the Federal Assembly of Russia for a term of five years.

Elvira Nabiullina is the current governor of the Bank of Russia, as of 22 August 2022. Nabiullina has held the position since June 2013. Before that she was minister of economic development and an aide to the Russian president.

Russia interest rate history: Rates hit 20% in 2022

Like the majority of central banks, the Bank of Russia follows inflation targeting policy. According to its website, the bank looks to maintain inflation close to its target of 4%.

The bank’s main policy instrument is the key rate, which is the interest rate on loans and deposits extended to and received from commercial banks by the central bank.

Official data on Russia’s interest rate history shows that the Bank of Russia conducted a series of rate hikes in 2014 as the rate climbed from 5.5% in February 2014 to 17% by December 2014.

Russia then saw over five years of interest rates cut, with rates falling to as low as 4.25% by July 2020.

The Bank of Russia conducted its first interest rate hike in over six years in the first quarter of 2021, taking interest rates up to 4.5%. This was followed by multiple hikes as rates hit 8.5% by the start of 2022.

In February 2022, the Bank of Russia increased Russia’s key rate from 9.5% to 20% due to high inflation and ruble depreciation following economic sanctions on Russia for its invasion of Ukraine.

Since then, the central bank has conducted five interest rate cuts to lower the key rate to 8%, as of 22 August 2022.

Russia’s interest rate history

Latest inflation data: Price pressures ease

Bank of Russia board members meet eight times a year to make decisions on key rates based on the inflation rate in Russia.

With inflation integral to key rate decisions, what is Russia's inflation rate at present?

The latest inflation data for the month of July 2022 showed that consumer prices decreased for the second month in a row. 


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Year-on-year (yoy) price growth for goods and services came in at 15.1% for July compared to 15.9% in June and 17.1% in May, according to Russia’s inflation rate history data.

Russia inflation rate

“As in June, increased fruit and vegetables supply and the strengthening of the ruble during the last few months largely contributed to the reduction in prices,” said the Bank of Russia in a press release.

Although signs of inflation decelerating were positive, the annual inflation rate was still way above the Bank of Russia’s inflation target. 

Food prices remained a major contributor to price inflation despite a slight easing in recent months.

Data showed that prices of food products saw price growth of about 18% yoy in the second quarter of 2022 compared to 7.9% yoy in Q2 2021.

The Bank of Russia said earlier in July that a drop in real wages and household incomes has played a disinflationary role in recent months. 

“In the medium term, supply-side factors are the key sources of the risk of consumer price growth acceleration,” said the Bank of Russia.

The central bank also said that an InFOM survey found that one-year inflation expectations of households declined in July to their lowest level since March 2021.

The consumer sentiment index increased for the fourth straight month to reach its highest level since May 2018, the Bank of Russia added.

Latest monetary decision: Fifth rate cut since April 2022

On 28 February 2022, the Bank of Russia raised interest rates to 20% after the Russian ruble depreciated nearly 30% against the US dollar following the start of the Russia-Ukraine war and Western economic sanctions.

“The increase of the key rate will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and inflation risks. This is needed to support financial and price stability and protect the savings of citizens from depreciation,” the Bank of Russia said in a statement in late-February 2022.

The Bank of Russia has cut interest rates five times since April 2022 as slowing inflation has allowed the bank to cut rates to single-digit figures.

In its latest interest rate cut conducted on 22 July, the Bank of Russia lowered its key rate by 150 basis points to 8%. 

“The Bank of Russia will consider the necessity of key rate reduction in the second half of 2022,” said the central bank.

The next monetary policy meeting of the Bank of Russia is scheduled on 16 September 2022. 

Forecast: Will Russia inflation rate rise?

According to a press release dated 12 August 2022, the Bank of Russia expected the annual inflation rate in Russia to stay at a range of 12% to 15% by the end of 2022.

The central bank’s Russia inflation forecast for 2023 and 2024 estimated annual inflation to slow to 5% to 7% in 2023 and return to its target of 4% in 2024.

Furthermore, household expectations of one-year inflation have declined to their lowest since March 2021.

This came in line with Russian businesses exhibiting similar expectations of the Russian inflation rate decelerating in the near-term.

“The decrease in companies’ price expectations was driven by a slowdown in the growth of costs and risks of economic activity, a stronger ruble, the stabilisation of prices for motor fuel, and the adjustment of the economy to changes in the external environment,” said the Bank of Russia.

A Reuters poll conducted in late July revealed that analysts have lowered their year-end Russia inflation rate expectations to 13.4% from the previous month’s expectations of 14.5%.

Elsewhere, data provider TradingEconomics expected Russia's inflation rate 2022 to be 15% by the end of September 2022.

In its long-term Russia inflation forecast, TradingEconomics expected key rates to trend around 7% in 2023 and 6% in 2024.

Note that Russia inflation forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence, before making any trading decisions. And never invest money that you cannot afford to lose.


Why is Russia's inflation rate so high?

In 2022, the Bank of Russia raised Russia’s key rate to 20% due to high ruble depreciation following economic sanctions on Russia for its invasion of Ukraine.

Is Russia dealing with inflation?

According to July’s data, the annual inflation rate was at 15% well above the Bank of Russia’s target of 4%.

Which country has the highest inflation rate?

Inflation rate changes with time and conditions. According to TradingEconomics, inflation in Turkey hit about 80% in July 2022, followed by 71% in Argentina.

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