Several regions achieved the target of the Central Bank on inflation


The results of the analysis of inflation for October of 2016, it became clear that some regions have already reached a claimed by the Bank of Russia inflation target of 4% in annual terms, which the regulator wants to achieve across the country as a whole only to the end of 2017, said sources close to the Central Bank. This is confirmed by the data of Rosstat. These four regions: Magadan oblast of 3.75%, Mordovia — 3,86%, Udmurtiya and the Orenburg region is 3.9 and 3.95%, respectively. Nine regions were quite close to that goal — there is the annual rate of price growth is between 4% and 5%. In Ingushetia and Tatarstan, Altai, Tyva, Khakassia, Saratov, Omsk, Sakhalin and Belgorod region.

Inflation is falling due to the transition of the population to savings and consumption patterns and falling incomes, analysts said. If revenues begin to grow, and the regions will receive additional money from the Federal budget, the risk does not fit in the inflation target to 4%, experts say.

The Bank of Russia announced the transition to a floating exchange rate and setting the inflation target at the end of 2014. At the same time was announced and the benchmark annual inflation rate of 4%, is scheduled for 2017.

Thus from the data of Rosstat, it follows that in October the annual inflation rate exceeded the benchmark of the Central Bank in seven regions. The highest it was in the Crimea and Irkutsk region — of 8.61 and 8.3%. Above 7% was held in October, annual inflation in the Moscow region, Nenets and Khanty-Mansi Autonomous Okrug and Jewish Autonomous regions and in the Khabarovsk region.

Regional disparities in inflation due to a complex combination of factors, both immediate and single, said in response to the Bank of Russia on request . Central Bank monitors the dynamics of price in some regions, said the representative of the Bank of Russia.

According to the forecast of the Bank of Russia, the overall level of inflation by the end of 2016 will amount to 5.5–5.6 percent. According to Rosstat, by the end of October, this figure amounted to 6.1%. Yet starting in 1991, record low inflation for the year was in 2011 — also 6.1 percent. But in 2014 the growth rate of prices accelerated sharply. Thus, according to Rosstat, in 2014 inflation was 11.4% in 2015 has risen to 12.9%. In 2016, she again began to fall.

In October, the head of the Bank of Russia Elvira Nabiullina stated that it still believes the current high inflation and investment inflation rate — the indicator of 4%. “Now the usual inflation of 6-7%, there are wishes: it’s time to cut rates, inflation has returned to normal. But 6-7% was more or less normal inflation in the mid-2000s years with the steady increase in oil prices”, — said Nabiullina.

In regions where inflation has fallen below the target of the Central Bank, this only occurred due to falling of solvent demand, analysts said. “Almost all the regions inflation in October to below 4% — depressive, it decreases the turnover of retail trade, and the population saves, but does not spend,” — said the adviser of the General Director of the macroeconomics of the company “Opening Broker” Sergey hestanov. According to him, from the list of “drops” only Tatarstan, which managed to reduce inflation due to increased production of local food — a generous offer has brought down the prices of food.

In most regions inflation has decreased due to the low growth rate of incomes of the population, agrees former Prime Minister of Russia, head of the Department of stock markets and financial engineering of Ranhigs Konstantin Korischenko. “In fact, we are dealing with the inflation of the consumer basket, where the price growth is 70% dependent on spending, which can afford the households”, he added.

In the Central Bank believe that inflation in the regions decreased, and the low growth of the Russian credit market — they are holding back aggregate demand. “As price and non-price lending conditions remained tough, which is largely determined by near — zero growth of the loan portfolio,” – stated in the review of regional credit markets for the second quarter of 2016.

High inflation, according to Rouslan, is stored mainly in the regions there are still high levels of wealth, but dependent on imports — this applies, for example, in Moscow region. The rest of high inflation in the regions-“the Champions” in terms of prices — the problem is purely logistical: they are all distant, the prices are growing faster because of the high cost of transportation of goods, the analyst adds.

In the coming months, the inflation rates in the regions will depend first and foremost on how they will allocate transfers from the Federal budget, continues hestanov. “The same may decrees of the President has created a greater burden on the regional budgets to fulfil them on their own they will not be able”, — the analyst believes. In the end, the more funds will allocate regions from the Federal budget, the faster inflation will rise, says hestanov.

In his opinion, the plans of the Central Bank’s inflation at 4% by the end of 2017 may not be performed. “But in any case, the presence of such a reference is better than none: better have a stagnating economy with low inflation than with high,” said Chestnov.

Chief economist of Alfa Bank Natalia Orlova believes that inflation will fall to 4% set by the Central Bank terms. “I don’t think that by the end of 2017 will be able to reduce inflation to 4%. Most likely, it will remain at 5-6%”, — says Orlov. In her opinion, to shoot down rising prices will prevent higher inflation expectations of population and business, as well as possible wage growth.

In itself, the emergence of the first to reach the target regions does not characterize the whole monetary policy, said the head of analytical Department for EMEA Deutsche Bank’s Elina Ribakova. In addition to inflation are important indicators of growth and development: investment, labour productivity, employment in the region, the quality of education. “The appearance of regions with low inflation, in my opinion, among other things, suggests that the economy has stabilized: while we at zero, but out of pique. However, too low inflation, too bad,” she said.

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