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Russia: Inflation cools for second straight month but remains above target in May
Latest reading: Inflation fell for the second consecutive month in May, coming in at 9.9% (April: 10.2%) and marking the joint-lowest reading since December 2024. Looking at the details of the release, costs for both goods and services rose at a softer pace. More broadly, historically elevated interest rates, recent currency strength plus signs of easing labor shortages likely kept prices in check. Still, May’s figure remained entrenched above the 4.0% target of the Central Bank of Russia (CBR), with fiscal stimulus and a smaller harvest and, more recently, surging potato prices fanning cost pressures.
Still, the trend pointed up slightly, with annual average inflation coming in at 9.4% in May (April: 9.3%). Meanwhile, core inflation dropped to 8.9% in May from April’s 9.2%.
Finally, consumer prices increased 0.43% from the previous month in May, largely unchanged from April’s 0.40% increase.
Outlook: Our panelists see disinflation picking up pace through December on a strengthening base effect plus elevated interest rates tightening credit conditions and incentivizing households to save. Still, inflation should outpace 2024 levels and more than double the CBR’s target in 2025 as a whole—only falling below the pre-pandemic 10-year average of 6.9% in 2026—kept elevated by sanctions and expansionary fiscal policy. A long-lasting ceasefire easing trade restrictions and labor shortages is a downside risk.
