At first, international sanctions aimed at crippling the Russian economy briefly caused currency turmoil and disrupted supplies. The panic buying spree that followed sent inflation more than quadrupling the Russian Central Bank’s 4% target, as annual price growth peaked just two months after the invasion of Ukraine in February, and began to slow down, weighed down by weak consumer demand and ruble gains.
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The Department of Statistics said the sharp drop in fruit and vegetable prices was a strong driver of the slowdown in inflation.
And the anti-inflationary momentum in Russia was so strong that the country’s central bank was able to cut interest rates below their pre-war levels. Even deeper monetary stimulus is possible, but it is likely to happen in smaller steps, especially as prices begin to face new threats.
Fiscal policy may be one of the risks to inflation, as the government boosts spending on anti-crisis measures and social programmes. The budget surplus fell sharply to 482 billion rubles ($7.9 billion) between January and July, shrinking by nearly two-thirds from the first six months of the year, according to the Finance Ministry.