Economy Ministry Predicts Inflation Will Slow to 4.5% in July

The Russian Economy Ministry said on Monday that its latest prediction on the level of annual inflation in the country says it will slow to 4.5-4.6% in July, Reuters reported.

The assessment comes after official data on Monday showed inflation was running at 4.7% in June.

The slowdown in inflation from 5.1% in May pointed to weak demand in the Russian economy, the ministry said after the data was released by the Federal Statistics Service.

The Russian central bank targets annual consumer inflation at 4.0%.

The inflation rate slowdown boosted market expectations that the Bank of Russia would consider cutting rates again this month.

“The lower than expected print justifies our call for a 25 basis point rate cut in July,” said Dmitry Polevoy, chief economist at Russian Direct Investment Fund.

“An inflation slowdown should support further monetary easing. We expect the CBR to cut the key rate by 25 basis points to 7.25% on July 26,” Alina Slyusarchuk from Morgan Stanley said in a note. 

Experts polled by Reuters in late June had on average predicted the central bank to keep the key rate unchanged at its next board meeting in late July after the bank trimmed the rate to 7.50% in June.

Analysts from Capital Economics research firm also said the further fall in inflation in June “alongside recent dovish comments from the central bank” had prompted them to pencil in a 25 basis point rate cut in July. 

Central Bank Governor Elvira Nabiullina said last week the Russian central bank will consider a rate cut at its board meeting in July, including an option to lower rates by as much as 50 basis points.