Price growth picks up temporarily, fuel market drives surge

In June, CPI inflation in Russia saw a marked acceleration, contrasting with the muted dynamics observed in April–May.

This uptick was primarily driven by developments in the fuel market, where rising prices exert both a direct impact and an indirect influence on other goods and services through increased costs and squeezed production opportunities.

These trends are likely reflected in July's flash data, which indicates an acceleration in weekly price growth and a broader range of CPI components now rising at an accelerated pace.

While disinflationary drivers clearly emerged in the second quarter, temporarily giving way to these new inflationary pressures, core inflationary pressures in the economy are assessed to be lower than last year.

However, the current price surge necessitates careful consideration of potential second-round effects, particularly how it might slow the decline of inflation expectations among households and businesses.

For the trend towards a further decline in core inflation to hold, private demand must be kept restrained, especially considering that risks around the medium-term inflation projection are skewed to the upside, a pattern evident in May and June.

With budget projections due for revision, the public sector is anticipated to contribute more significantly to aggregate demand over the monetary policy horizon than previously expected.

Strong consumer activity, combined with still elevated inflationary expectations and a gradual easing of labour market rigidity, has recently been complicated by increased supply constraints in the fuel market.

To ensure inflation sustainably returns to 4 percent and remains near the target, a carefully calibrated monetary policy path is essential, one that accounts for both current conditions and shifts in the balance of future inflation risks.

Economic growth resumed in the second quarter after an early-year decline, though sectoral divergence has slightly increased compared to 2025, reflecting ongoing structural transformation, temporary capacity reductions due to repairs, and fluctuations in global commodity markets.