Inflation in Russia accelerated to almost a 5-year high in June

Russia's inflation rate accelerated last month to its highest level in almost five years. This was shown by data published on Wednesday by the Russian statistical office Rosstat. The latest data thus increase the assumption that the central bank will raise interest rates more significantly at its next meeting at the end of July. Consumer prices rose 6.5 percent year on year in June after rising 6 percent in the previous month. The June growth rate was the strongest since August 2016. Inflation also exceeded the estimates of analysts polled by Reuters, who expected an acceleration in price growth, but expected it to increase by 6.3 percent. In a month-on-month comparison, consumer prices in Russia rose by 0.7 percent in June. They thus continued the growth rate recorded in May. Analysts now even more expect that the Russian central bank will raise interest rates from the current level of 5.5 percent at its meeting on July 23. It increased them by 50 basis points on June 11. The central bank has an inflation target set at 4 percent. However, inflation reached this level in November last year and does not yet show any signs of slowing down. Russia's central bank chief Elvira Nabiullin said in an interview with Bloomberg TV in late June that the bank could raise the key interest rate in the range of 25 to 100 basis points on July 23. The key interest rate could thus reach up to 6.5 percent. Nabiullin said this at a time when Rosstat's data on further inflation acceleration were not yet known. On the one hand, higher interest rates could solve the problem of rising consumer prices, but on the other hand they can limit economic growth. This is at a time when Russia is struggling with a renewed increase in the number of people infected with the new coronavirus.