Inflation expectations decline in February, consumer sentiment weakens
Inflation expectations predominantly declined in February 2026, according to the Central Bank of Russia's latest commentary. Households' one-year inflation expectations decreased to 13.1%, while companies' price expectations also dropped, and consumer sentiment weakened.
Households and businesses see price growth easing
In February 2026, indicators of inflation expectations predominantly declined across various segments.
Households' inflation expectations for the next year decreased by 0.6 percentage points month-on-month to 13.1%, as reported by InFOM's survey.
This downward trend was observed among both respondents with and without savings.
However, their long-term inflation expectations for the next five years remained unchanged at 11.4%.
Companies' price expectations for the next three months also dropped, indicating that the impact of the increased tax burden on their pricing outlook has largely dissipated.
Conversely, breakeven inflation derived from inflation-indexed federal government bonds (OFZ-IN) edged up on average for issues maturing in 2028, 2030, and 2032.
Analysts' inflation forecasts for the end of 2026 were raised, while those for longer periods remained stable, close to the 4% target.
Consumer sentiment hits two-year low
The consumer sentiment index (CSI) declined to 97.7 points in February 2026, marking its lowest level since December 2022.
Both the present situation index, which fell to 87.6 points, and the expectations index, at 104.4 points, contributed to this overall weakening.
Respondents' estimates of their personal financial standing over the past year decreased, and the current situation was seen as less favorable for large purchases.
The propensity to save, however, increased to 54.9%, exceeding the average since early 2016.
The Bank of Russia forecasts annual inflation to fall to 4.5–5.5% in 2026, maintaining its target from 2027 onwards.
Mixed signals for policy makers
The predominant decline in inflation expectations offers a glimmer of hope for the central bank's disinflation efforts.
However, the persistent weakness in consumer sentiment, hitting a two-year low, suggests underlying economic anxieties that could dampen future demand.
This mixed picture complicates the monetary policy outlook, requiring careful balancing between inflation control and supporting economic activity.