Consumer prices declined in 70 Russian regions in August compared with July, according to data released by the Central Bank of Russia on September 18, as annual inflation also eased in 77 of the country’s regions. (chart)

Inflation has been falling faster than expected thanks to CBR governor Elvia Nabiullina unorthodox plan to artificially cool the economy  to pull inflation down appears to be working.

The month-on-month decline was driven primarily by falling prices for key food items, including fruit and vegetables, eggs, butter and vegetable oils. In four regions, the monthly price drop was more pronounced than in July. However, inflationary pressures persisted in some sectors, particularly among goods sensitive to currency fluctuations.

“Prices for certain import-dependent items grew under the effect of a weaker ruble, e.g. communications devices, perfumes and cosmetics, clothing and footwear,” the Bank said. “By contrast, prices for other categories of goods continued to go down, e.g. cars, instruments, and equipment.”

Despite the broad deceleration, the Central Bank noted that annual inflation in August remained well above the target level. The Bank is pursuing a tight monetary policy aimed at reducing inflation to 4.0% in 2026 and maintaining it close to that level thereafter.

The Russian economy has faced continued inflationary pressure in recent months, with the ruble’s depreciation contributing to rising prices in several consumer segments. The Central Bank raised its key interest rate to 14% in July to contain inflation expectations and support the currency, following a sharp sell-off.

The uneven price dynamics reflect broader structural challenges in the Russian economy, particularly in sectors reliant on imported goods. While domestic food prices are showing signs of easing, the effect of exchange rate volatility is likely to keep inflation elevated in the near term.

“Despite the decline, annual inflation in August stayed considerably above the target,” the Central Bank said.

The Bank of Russia is expected to provide updated macroeconomic forecasts at its next policy meeting later this month.