The Central Bank has improved the forecast on inflation for 2016

The Bank of Russia announced the reduction of the inflation forecast for 2016. According to experts of the Central Bank, for the current year consumer prices of goods and services will grow in Russia on the average on 5-6%, 6-7%, as previously thought. CB bayznel the Outlook change by stabilization of the rate of inflation. In may 2016, consumer prices rose on average at the same 0.4%, in April. While yoy inflation for two months is held at 7.3%.

“Price growth for the bulk of goods and services continued to slow down <…> It indicates the potential for further deceleration of annual inflation in the absence of unexpected shocks”, — stated in the document of the Central Bank.

It also emphasizes the preservation of “certain proinflationary risks associated with elevated inflation expectations, the absence of a strategy for fiscal consolidation and uncertainty about the indexation of wages and pensions”.

In April 2016, the head of the Central Bank Elvira Nabiullina warned about the risk of getting stuck in an inflation rate of 6-7%, which she described as “totally unacceptable” from the point of view of investment growth.

On Thursday published the document experts of the Central Bank also pointed to the increasing rate of annual food inflation in may 2016, it accelerated by 0.3 percentage points (from 5.3% in April to 5.6%), largely due to the “influence of the low base of comparison on the dynamics of prices for fruit and vegetables”. “If in April the price of fruit and vegetables was lower than a year earlier, in may, their level is consistent with last year (despite the fact that the rate of their increase for the month was small). Similar effects were observed in the rate of increase in the prices of some other food (eggs, sugar)”, — stated in the document of the Central Bank.

The annual growth of prices of food commodities in may 2016 was slightly lower in April (8.4% compared to 8.5%) but still significantly higher than the growth in food prices. Experts of the Central Bank related with active import substitution in the food industry and a high level of supply of agricultural products.

On the eve of the Deputy head of the RF Ministry of economic development Alexei Vedev said that the Ministry forecast inflation in 2016 will be reduced to 5.9%. “The most positive for us is the level of inflation. It decreases steadily and this year even, probably, our estimates of 6% may be slightly lower – at 5.9%. Over the last few years we see this trend when food inflation is decreasing faster than overall inflation,” said Vedev.

The same day experts of the Center of development of the Higher school of Economics (HSE) in its report has warned that the slowdown in price growth has not helped to stop the fall in consumer demand from the population. According to the HSE, the retail turnover in may 2016 compared to the April and net of seasonality has decreased by 1.1% (the drop in rates has continued for 17 consecutive months), while the other fell stronger sales of food products. During the HSE noted that such a situation indicates a deterioration in the welfare of the poorest segments of the population.

According to Rosstat, real income of Russians (that is, the money that is left on the hands after all required payments and can be spent on their own needs or deferred to a future date in may 2016 fell at an annual rate of 5.7%. Compared with the April decline in revenues slowed somewhat, but the rates still remain high. Moreover, to compare their current level of Rosstat has already heavily fallen than last year. According to official data, the continuous decline in the incomes of Russians continues more than two years in a row — the last time their growth in annual terms was recorded in October 2014.