Russian Inflation Slows More Than Forecast in Boost for Easing

Russian inflation decelerated for a second month, setting the stage for the central bank to ease monetary policy further after the ruble’s crisis last year.

Consumer prices rose 15.8 percent from a year earlier in May, compared with 16.4 percent in April, the Federal Statistics Service in Moscow said in a statement on Thursday. The median estimate of 23 economists surveyed by Bloomberg was 15.9 percent. Prices gained 0.4 percent in the month, the smallest increase since August 2014.

The continued slowdown means the central bank can focus on lowering borrowing costs as the economy enters its first recession in six years. The Bank of Russia has cut its benchmark interest rate three times to 12.5 percent after an emergency increase to 17 percent in December as oil prices stabilized and the ruble rebounded. Inflation may slow to 12 percent by year-end, according to the central bank.

“If there are no new considerable external shocks, inflation will continue to slow down in accordance with our forecasts,” Bank of Russia Governor Elvira Nabiullina said at a banking conference in St. Petersburg on Thursday. Price growth has started to ease “quickly” in recent months after a jump early in the year caused by the ruble’s weakening, she said.

The ruble is the world’s best performer globally against the dollar this year with an 11 percent gain after losing almost half of its value in 2014. It weakened 0.9 percent to 54.7650 versus the dollar as of 3:43 p.m. in Moscow.

Derivatives traders see borrowing costs falling further, with forward-rate agreements signaling 66 basis points of decreases in the next three months.

The central bank, whose medium-term inflation target is 4 percent in the medium term, will update its forecasts by the next rate meeting on June 15, according to Nabiullina.

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