Russian Weekly Prices Drop First Time Since 2011 on Food Costs

Russia had its first weekly price drop in almost five years as fresh produce such as fruit and vegetables helped drive down food costs.

Consumer prices fell 0.1 percent in the seven days through Aug. 1 after increases of 0.1 percent in each of the past three weeks, reaching 4 percent from the start of the year, the Federal Statistics Service in Moscow said Wednesday. It will report the annual price index for July later this week. Inflation slipped to 7.4 percent last month from 7.5 percent in June, according to the median of 17 estimates in a Bloomberg survey.

“The result stems from mixed dynamics in core food items, flat utility tariffs and accelerated deflation in seasonal raw foodstuffs,” said Dmitry Polevoy, chief economist for Russia at ING Groep NV in Moscow. The “good performance” means there’s “downside potential for the key rate in the second half.”

The central bank has looked past the letup in prices to less than half last year’s level as inflation expectations remain elevated, pushing real interest rates to the world’s second-highest. Policy makers have cut their benchmark once since July 2015, to 10.5 percent, and warned last week that the risks of missing their 4 percent target next year “persist.” The central bank forecasts price growth will ease below 5 percent next July.

Bank of Russia Governor Elvira Nabiullina said in June that she expected weekly price declines in August or September as a result of a good harvest, while the Finance Ministry has predicted “small” deflation this month.

Prices for fruit and vegetables declined 3 percent on average last week, with declines of 8.5 percent for tomatoes and 7.4 percent for cucumbers, according to the statistics service.

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