Russian economy expands in Q2, inflation slows

Economic activity in Russia showed a marked improvement in the second quarter of the year, building on the performance of the first two months.

Core industries demonstrated robust growth, as evidenced by April data and high-frequency indicators for May.

Consumer demand continued its expansion, supported by rapidly growing incomes across the economy.

This broad-based growth contributed to a generally positive economic outlook.

Concurrently, inflation experienced a slowdown in April and May.

The deceleration in overall Consumer Price Index (CPI) growth was primarily influenced by its more volatile components.

While core inflation also declined, its reduction was less pronounced compared to the headline inflation figures, indicating underlying price pressures persist.

Inflation risks remain skewed to the upside, largely due to the Ministry of Finance's fiscal policy updates for 2026–2029.

Tight monetary conditions are crucial for inflation's sustainable return to target.

Monthly price growth (seasonally adjusted) fell below 4% annualized, but this deceleration stemmed mainly from transitory factors, implying disinflation is slower than headline CPI suggests.

Economic dynamism is increasingly supported by gradual monetary easing, which began in mid-2025.

Accelerated annual growth in monetary aggregates signals lower policy tightness compared to late 2025.

Financial markets in April–May reflected expectations of further gradual easing and a downturn in commodity prices.