Annual inflation in Russia exceeded Central Bank forecasts following utility price hikes
Inflation in Russia reached 0.96% between September 29 and October 5 due to a sharp increase in utility tariffs. This marks the highest weekly index growth since the VAT hike in the spring of 2022, Rosstat reported. This was reported by The Moscow Times citing Rosstat, according to the portal PromPolitInform.
The indexation of municipal payments in the country had been postponed until the end of the elections. Starting October 1, the total utility bill was supposed to grow by 9.9%, but in practice, the figures turned out higher. On average across the country, wastewater disposal rose in price by 17.1%, cold and hot water supply by 15.3% and 14.2%, heating by 12.7%, and electricity by 12%.
Annual inflation growth
As a result, annual inflation jumped to 7.17% according to the Ministry of Economic Development, exceeding the upper bound of the Central Bank’s forecast of 6–7% for the year-end. Since the beginning of the year, Rosstat estimated price growth close to the lower bound of the regulator’s forecast at 5.94%. Excluding housing and communal services, consumer prices for the week increased by 0.21%, compared to 0.25% a week earlier.
Expert and analytical assessments
Head of the Center for Macroeconomic Analysis and Short-Term Forecasting Dmitry Belousov calls the fourth quarter a moment of truth for inflation. The tariff hike coincided with the seasonal growth of general inflation, the consequences of the ruble’s weakening, and a fuel shock. The prolonged persistence of high fuel inflation has affected the cost of a wide range of goods, including groceries, haberdashery, clothing, and household services.
Growth of goods prices and regulator stance
Last year during the tariff week, the consumer price index grew by 0.79%, but back then there was a seasonal decline in fruit and vegetable prices. Currently, other components of the consumer basket continue to grow more expensive as well: food products added 0.17% over the week, and non-food goods added 0.13%. Specifically, eggs rose in price by 2.2%, chicken and fish by 0.5%, pork, butter, and milk by 0.4%, and gasoline by 0.3%.
Constant high tariff indexation increases overall pressure on the economy, raising business costs and public inflation expectations. The regulator noted that this forces companies to raise prices and spend a larger share of profits on current expenses instead of development. In addition, elevated tariff indexation reduces incentives for infrastructure enterprises to increase their efficiency.
Illustrative photo: Russian Government / Public domain
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