MOSCOW: Core inflation fell to a record low in Russia in April, and headline inflation moved to within touching distance of the central bank’s target, official data showed on Friday. The data from statistics service Rosstat will reinforce arguments for the central bank to continue easing monetary policy after a 50 basis point rate cut last week.
Core inflation, which typically excludes volatile items such as food and energy, fell from 4.5 percent in March to 4.1 percent last month, the lowest level in data stretching back to 2003. Headline inflation fell to 4.1 percent in April from 4.3 percent, in line with analysts’ forecast in a Reuters poll. The central bank has a long-held goal of bringing inflation to 4 percent by the end of 2017, and that target now looks achievable. It has kept monetary policy tight since 2014 to achieve its inflation goal but has cut rates twice so far this year as inflation has slowed more rapidly than forecast. “We expect another interest rate cut at the next board meeting in June and that rates will ultimately be lowered by more than most expect, both this year and next,” William Jackson at Capital Economics said in a note.
Capital Economics predicts Russia’s key rate will be lowered to 8 percent by the end of the year from 9.25 percent at present. The median forecast in a Reuters poll is for the rate to end 2017 at 8.5 percent. ING economist Dmitry Polevoy said he saw headline inflation falling to 3.9 percent year on year in the second quarter and to 3.6 percent at the end of the year.
