Russia’s Inflation Will Hover Around 5.9% in March
Bottom Line: After edging down to 5.9% in February from 6% in the previous month, we expect Russian inflation to continue its decreasing pattern moderately in March owing to lagged impacts of previous aggressive monetary tightening and relative resilience of RUB. March inflation figures will be announced on April 10, and we foresee y/y prices to hover around 5.8%-5.9%. Despite Central Bank of Russia (CBR) predicts annual inflation to decline to 4.5–5.5% in 2026, our 2026 average headline inflation projection stays at 5.9% due to inflationary risks.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), January 2015 – February 2026
Source: Continuum Economics
After annual inflation edged down to 5.9% y/y in February, we expect the decreasing trend to continue moderately in March thanks to lagged impacts of previous aggressive monetary tightening, relative resilience of RUB and decreasing core inflation. We foresee y/y prices to hover around 5.8%-5.9% in March. March inflation figures will be announced on April 10.
According to a recent Ministry of Economic Development announcement, annual inflation was recorded at the level of 5.86% as of March 30 and inflation geared down to 0.17% from March 24 to 30. Yearly inflation accelerated to 5.83% in the period from March 17 to March 23 from 5.79% a week earlier.
Though CBR is projecting that inflation returns to the 4.5-5.5% target in 2026, we think reaching this target will be tough due to continued military spending, labor shortages, and supply-chain disruptions coupled with adverse effects of the value-added tax (VAT) increase in 2026 and excise taxes. We think pro-inflationary risks still prevail over disinflationary ones in the mid-term horizon.
Our CPI forecasts stand at 5.9% and 5.2% in 2026 and 2027 since we expect inflation will continue to soften as previous tight monetary policy affect bank lending and private consumption. High domestic gas and oil production will curtail domestic energy prices in contrast to global energy prices. Higher global oil prices in Q2/Q3 and temporary sanctions relief due to the Iran conflict could boost Russia crude exports help relieve fiscal pressures, and stimulate growth. (Note: Higher oil revenues may facilitate expanded military spending, potentially triggering demand-pull inflation. Conversely, they could moderately decelerate inflation via the FX channel, although the impact of sanctions would likely limit this effect. We expect the net result to be a secondary rather than a dominant factor). We still believe a peace deal in Ukraine remains the real key to ease pressure on inflation and alleviate demand-supply imbalances in Russia.