Russian inflation accelerates in January despite rate hikes

Orban caps staple food prices to fight inflation ahead of vote

On an annual basis, inflation rose to 8.6% in early January, the Economy Ministry said. Price growth inflation in December was 8.4%, more than double the central bank’s target. Prices for food, construction materials and cars drove the increases last month, according to the statistics agency.

Inflation in Russia accelerated early this year, even following ten months of financial  tightening from the national bank took its critical rate to the most elevated level starting around 2017. Customer costs rose 0.56% in the period Jan. 1-10, up from 0.26% in the week ending Dec. 27, 2021, the Federal Statistics Service detailed late Wednesday. The agency refered to higher service costs, especially fares for public transit, and expanded food costs as adding to the increment.

“Issues with deliveries and production and new virus variants are pushing producers to raise prices that they delayed earlier,” said Sofya Donets, an economist at Renaissance Capital in Moscow. “Inflation may reach 8.8% in January-February, giving reasons to the central bank to raise rates again.”

Bank of Russia Governor Elvira Nabiullina said that more key-rate increases might be needed to curb price growth even after December’s 100 basis-point increase. Nabiullina has been among the most aggressive among emerging-markets central bankers in raising rates to combat inflation.

Policy makers may consider another hike of as much as 100 basis points in February again, said Dmitry Polevoy, an analyst at Locko-Invest. Retailers may take advantage of the New Year to raise prices, he said.

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