Russian inflation is showing an upward trend in both weekly and annual terms; an expert explains the key factors.
After several months of gradual decline, inflation in Russia has begun to accelerate again. In August, the country even experienced deflation at 0.4%, and annual inflation in September dropped to 7.98%. However, this trend proved short-lived. According to the Ministry of Economic Development, from September 30 to October 6, prices rose by 0.23%, up from 0.13% the previous week. More significantly, annual inflation has also increased, now standing at 8.08%.
Question: What are the expectations regarding further price growth and to what extent, according to Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences and Doctor of Economic Sciences?
Nikolaev: The acceleration of inflation is an unpleasant surprise for the Central Bank. The regulator will have to decide how to manage the key rate. Continuing to lower the rate amidst rising inflation could force the Central Bank to increase it later. It is highly probable that at its next meeting, the Central Bank`s Board of Directors will pause and maintain the current rate of 17%.
Question: What factors contributed to the acceleration of inflation in early October, and will they remain influential until the end of the year?
Nikolaev: The seasonal price reduction for fruits and vegetables observed in August has exhausted its effect. Tomato prices rose by 8% in a week, and chicken eggs by 3%. This seasonal factor will now contribute to inflationary pressure. Unfortunately, other persistent reasons for price growth also remain.
Question: Specifically, what are these reasons?
Nikolaev: These include tax increases. The Ministry of Finance acknowledged that raising VAT from 20% to 22% in 2026 would add about one percentage point to inflation, but this expectation already influences current inflation. Another significant factor is the sharp increase in gasoline prices — 0.9% in a week. In regional areas, gasoline is 4-5 rubles per liter more expensive than in Moscow, which is considerable! If the weekly inflation rate of 0.23% persists until December, the Ministry of Economic Development`s annual forecast of 6.8% will be unattainable, and inflation will certainly exceed 7%.
Question: Why do you believe this to be the case?
Nikolaev: Since the beginning of the year, prices for goods and services have already risen by more than 4.5%, while the annual forecast was precisely 4.5%. Given that three months remain until the end of the year, with December traditionally being a month of high consumer spending, achieving the 6.8% target seems highly improbable.
Question: In your opinion, what will the annual inflation rate be?
Nikolaev: I estimate it will be between 7.5-8%. In the current circumstances, this could be considered a reasonable outcome. However, we must not forget the upcoming VAT increase in 2026 and the anticipated significant indexation of housing and utility tariffs. Inflation appears to be becoming chronic, which is a concerning trend.
Question: Besides the key rate, do the Central Bank and the government have other mechanisms to curb inflation?
Nikolaev: A targeted approach is needed. What I mean is identifying and monitoring «trigger goods» that disproportionately drive inflation; there aren`t many of them. It might be necessary to increase imports of such goods, as was done previously with eggs and is now being considered for gasoline, or to inject funds from our reserve funds into the market. I am confident that the responsible authorities understand these issues, but statistics relentlessly indicate that the government has not yet managed to effectively tackle inflation.
