MOSCOW, Feb 19 (Reuters) – Russian households’ inflation expectations, an important gauge for monetary policy, fell to 13.1% in February from 13.7% in January, central bank data showed on Thursday, with analysts saying the drop increases room for future rate cuts.
The indicator, which measures how households expect pricesto change over the next year, had been rising since October after the government decided to raise value-added tax (VAT) to 22% from 20%, a move that typically feeds into prices.
Inflation jumped at the start of the year when the VAT rise took effect, but the central bank said it would have a one-off impact and that price growth would stabilise. Last Friday the bank cut its key rate by 50 basis points to 15.5% and signalled that it could fall further.
“February’s decline in inflation expectations suggests that households see January’s inflation acceleration as temporary and driven by one-off factors, and expect more moderate price growth going forward,” the central bank said in a comment to Reuters on the latest data.
Sofya Donets, chief analyst at T-Bank, said the trend pointed to further easing. “Apparently, the VAT hike acted as a mega-trigger and captured all the attention. But it also dropped out of expectations faster,” she said.
The early-year inflation spike had previously cast doubt on the central bank’s scope for additional rate cuts, which are seen as important for supporting a slowing economy and returning it to growth.
The inflation expectation gauge is particularly important in an environment where many Russians question official data and believe that prices of some goods – most recently cucumbers – are rising much faster than statistics suggest.
“A systemic decline in inflation expectations provides fairly strong arguments in favour of a further cut in the key rate at the next meeting on March 20,” said Denis Popov of PSB Bank.
(Reporting by Elena Fabrichnaya; Writing by Gleb Bryanski; Editing by Mark Trevelyan)
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