A war launched by the Kremlin against Ukraine took the blame for driving up the global cost of everything from food to fuel, prompting international sanctions that also contributed to one of the biggest price shocks in modern Russian history.
But a year on, and even as inflation continues to rage in many major economies, price growth in Russia has plunged near the level in Japan and well below those seen in the US and the Eurozone.
On an annual basis, Russian inflation reached 3.5 per cent in March from almost 11 per cent in the previous month, according to data released on Wednesday. It’s now at a fifth of its peak last year and under the central bank’s 4 per cent target for the first time since 2020.
The stark contrast with much of the rest of the world has allowed Putin to score easy political points with his domestic audience, highlighting Russia’s resilience and claiming sanctions against his country backfired on those who imposed them. In televised remarks on Tuesday, Putin said inflation may even be below 3 per cent this month.
The Russian leader has previously chided western governments for labelling surging costs as “Putin’s inflation,” saying their own policies such as money printing were at fault.
“The drop in annual inflation is largely optical and goes back to the high base effect, created by last year’s ruble decline at the start of Russia’s invasion of Ukraine. But we expect a weak ruble, labour shortages and a likely shortfall in grain harvest to push inflation higher in coming months,” said Alexander Isakov, Russia economist.
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The turnaround in Russia is in large part a result of statistical effects because a brief crash in the ruble and panic buying by consumers a year ago created a high base of comparison. Still, muted domestic demand and lingering caution by consumers are keeping shorter-term gauges of price growth in check.
