Annual inflation slowed in most Russian regions (74) in July despite the indexation of utility rates, the Central Bank of Russia (CBR) reported on August 22. (chart)

Inflation has started to fall, and faster than the CBR expected. Annual inflation in Russia eased to 8.79% in July from 9.4% in June, despite a month-on-month acceleration in consumer price growth.

Food prices dropped in most constituent territories as compared with June. In particular, fruit and vegetables, eggs and sugar continued to cheapen, the CBR said in a note.

The one piece of bad news the CBR reported was in its most recent survey the population’s inflation expectations remain elevated. Population inflation expectations for the year ahead rose to 13.5% in August from 13% in July, according to a short survey by inFOM, conducted at the request of the Bank of Russia. In June, this indicator did not change compared to July, but fell to 13% from 13.4% in May.

However, expected inflation among those with savings remained unchanged in August at 11.9%, while among those without savings, it rose to 14.6% from 14.2%. 

In many regions, non-food prices started to grow moderately after declining. Nonetheless, prices for cars, electrical goods, tools, and equipment continued to decrease amid weak demand. This trend was additionally fuelled by the ruble appreciation over the previous months.

Services prices went up significantly, primarily due to higher utility rates. However, health resort and passenger transportation services cheapened, and the rise in prices for foreign travel levelled off.

Thanks to slowing inflation the regulator has already managed to cut rates by 300bp in the last two months and expected to cut by another 300bp before the end of the year.

The Bank of Russia’s monetary policy is aimed at bringing inflation back to 4% in 2026 and maintaining it close to this level further on.