Breaking the trend: Inflation has finally started to slow down steadily
The latest weekly inflation data showed that prices in the country continue to slow down. For the fourth time in a row, consumer price growth was below the 0.1% mark. Moreover, year-on-year inflation has become single-digit, falling below the 10% mark. Some analysts believe that the trend has been broken. At the same time, a number of indicators, such as the continued rise in the cost of services, indicate that the victory over inflation has not yet been achieved on all fronts. What is happening with rising prices in Russia and does this mean that the Central Bank will lower the rate in the near future? — in the Izvestia article.
Inflation slows down in May
According to Rosstat, according to the results of the week from May 20 to May 26, 2025, inflation was 0.06%. Prior to that, it was 0.07% from May 13 to May 19, 0.06% from May 6 to May 12, and 0.03% from April 29 to May 5. Thus, prices have increased by only 0.21% since the beginning of May, and by 3.34% since the beginning of the year. If we take the annualized value (that is, how prices would have increased over the year if all the weeks had been the same as last week), then it was only 3.1%. Finally, if we compare the figures for May with May 2024, the price increase was 9.78% compared to 10.23% at the end of April.
The slowdown on a weekly basis was brought by fruit and vegetable products, which traditionally become cheaper during this period of the year (this time by an average of 0.8%). For example, cucumbers have decreased in price by 9%. A number of vegetables rose in price (for example, carrots), but overall prices were falling. Nevertheless, it is not necessary to explain the current decline solely by seasonal factors, since the observed slowdown in price growth also occurs on an annual basis. In addition, the price index for non-food products is in the negative zone (-0.05%).
The drop was previously recorded in the wholesale sector. Producer prices of industrial products fell by 1.4% in April, following a decline of one and a half percent in March. Production prices can serve as a leading indicator for consumer prices if the trend has been present for several months. In our case, producer prices slowed to 2.7% year-on-year, whereas at the beginning of the year the increase was 10%. To be fair, this slowdown was largely caused by the collapse in prices in mining, but at the same time, the pace in processing was unremarkable.
Thus, an interesting combination is observed. On the one hand, producer prices in Russia are falling, and on the other, imports are also becoming cheaper due to the strengthening of the ruble. At the same time, a significant part of the goods comes from China, where deflation has been fixed for many months. Thus, there is a triple downward pressure on consumer prices at once. In this situation, it is logical to expect an increase in deflationary processes.
However, there are some signals that inflation has not lost all its strength. For example, prices for services continue to grow at a faster pace (0.16%). The service sector, as a rule, is less dependent on sharp fluctuations in the market, and the rate of price growth there does not change so quickly, so these figures are quite indicative. In addition, the data from inFOM shows the stability of inflation expectations, which now stand at 13.4%.
Ahead of expectations
According to Olga Belenkaya, head of the Macroeconomic analysis department at Finam, so far the slowdown in inflation is ahead of the Central Bank's forecasts.
— The Central Bank expected annual inflation to peak in May and slow down to 10.1% (YoY) by the end of June. However, it seems that the maximum was already passed in March (10.34% yoy). By the end of April, annual inflation decreased to 10.23% (YoY), and according to the latest weekly data, as of May 26, it went below 10% (yoy) and amounted to 9.8%. The dynamics of current seasonally adjusted inflation (SAAR), which is more important for the Central Bank, is also developing positively. In April, according to the Central Bank, it continued to slow down to 6.2% against 7.0% in March, 8.2% in the first quarter of 2025 and 12.9% of SAAR in the fourth quarter of 2024. That is, the current inflation is still below the April estimate of the Central Bank. Judging by the weekly data, this trend may continue in May," the expert states.
She added that without taking into account the volatile components and the strengthening of the ruble, inflation is still slowing down, but more slowly. According to analysts of the Central Bank, the price increase, analytically adjusted for exchange rate changes, remained close to 10% SAAR, and this indicator, in their opinion, reflects a stable component in the slowdown in the current rate of price growth.
— Unfortunately, inflation is slowing down very unevenly across groups of goods and services, and the main decline is in the group of non-food products. At the same time, food and services are still rising in price at a high rate, which may contribute to the inflation expectations of the population that have increased over the past 2 months," Olga Belenkaya believes.
The solution is not obvious
Although the trends are generally quite noticeable, there is no predestination about the Central Bank's behavior regarding the key rate yet — analysts' opinions differ here.
— In our opinion, at the upcoming meeting, the Central Bank may start discussing a reduction in the key rate, — Belenkaya notes. — On the one hand, maintaining the key interest rate at a record level for such a long time (since October last year) with decreasing inflation and an increasingly obvious slowdown in the economy creates the risk of "hypothermia" of economic activity. On the other hand, the beginning of a reduction in the key rate before achieving sustainability and a sufficient rate of reduction in inflation as a whole and its components, as well as a decrease in inflation expectations of the population, creates a risk that inflation will start to rise again. The spring frosts create uncertainty about this year's harvest. And increased external risks (the impact of US tariffs on the global economy, lower oil prices, and possible new sanctions) can quickly reverse one of the main drivers of lower inflation — the strengthening of the ruble.
Belenkaya believes that the option of lowering the key rate at the upcoming meeting is not excluded. But, most likely, the regulator will keep it at 21%, while it may soften the signal and rhetoric again, "hinting" at the possibility of starting to lower it at the next meetings if favorable conditions exist for this. The Central Bank will consider this issue in detail at the next meetings.
In turn, Natalia Pyrieva, a leading analyst at Cifra Broker, believes that a combination of factors may force the Central Bank to act more decisively.
— We are talking about a weakening of price pressure, a decrease in credit momentum, a high savings rate, on the one hand, and an increase in credit risks in the system associated with a deterioration in the financial situation of Russian companies due to high interest rates, on the other. These arguments may be sufficient to justify a June 6 rate cut to 19%.
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