Russia records marginal weekly deflation ahead of rate-setting meeting

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FILE PHOTO: A customer hands over Russian rouble banknotes and coins to a vendor at a market in Omsk

(Reuters) – Russia recorded its first weekly deflation for the first time since August 2021, data showed on Wednesday, a day before an extraordinary rate-setting meeting that the central bank plans to hold on Thursday.

Weekly inflation spiked to 2.22% in early March, soon after Russia started what it calls a “special military operation” in Ukraine on Feb. 24, but has been slowing since then, capped by a rapid recovery in the rouble.

In the week to May 20, the consumer price index (CPI) declined 0.02% after rising 0.05% in the previous week, data from statistics service Rosstat showed.

In annual terms, inflation slowed to 17.51% from 17.69% a week earlier amid a decline in consumer activity, the economy ministry said.

“It is important to restart … lending in both consumer and corporate sectors,” Deputy Economy Ministry Polina Kryuchkova said, adding that Russia needed timely monetary policy measures.

Her comment comes soon after the central bank said it would hold an off-schedule meeting on Thursday where it is widely expected to lower the key interest rate from 14%.

“We won’t be surprised if the central bank would lower the key rate by 300 basis points to 11%,” CentroCreditBank analysts said.

So far this year, consumer prices in Russia rose 11.82%, Rosstat said.

Prices on nearly everything, from vegetables and sugar to clothes and smartphones, have risen sharply in recent weeks as Russia encountered logistics disruptions and increased volatility in the rouble.

Annual inflation has accelerated to 17.83% in April, its highest since January 2002. The central bank, which targets inflation at 4%, said the annual increase in consumer prices was on track to reach to 18-23% in the whole of 2022.

President Vladimir Putin said on Wednesday inflation won’t exceed 15% this year.

(Reporting by Reuters; Editing by Chizu Nomiyama)

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