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Russian Inflation 'Lowest' In Modern Russian History

Dmitry Medvedev

Dmitry Medvedev

Russian Prime Minister

"We currently have the lowest inflation in the entire period of the existence of a market economy in Russia -- that is, in 25 years."

...for now, at least

Inflation in Russia is indeed trending downward, but Medvedev jumped the gun in his October 17 comments to the Foreign Investment Advisory Council, a joint project between the government and major foreign companies operating in Russia.

As of September 2016, the year-over-year inflation rate (that is, the percent change from a year ago) in Russia stood at 6.42 percent, according to the most recent official government statistics. While this is indeed very low compared to previous 12-month periods since the fall of the Soviet Union in 1991, it is far from the lowest rate over the past 25 years. In fact, it was only the lowest since February 2014, when the rate stood at 6.2 percent. The following month, the Kremlin was hit with Western sanctions in response to its annexation of Ukraine’s Crimea territory. Those, together with the falling price of oil and additional sanctions, helped send the Russian economy into a tailspin and drive double-digit inflation that Moscow is only recently beginning to recover from. The actual lowest year-over-year inflation rate in post-Soviet Russia was recorded in April 2012, when it hit 3.57 percent.

Describing inflation in terms of the year-over-year change is a common practice, one used, for example, by the U.S. Bureau of Labor Statistics in its monthly report on consumer prices. In fact, Medvedev’s boss, Russian President Vladimir Putin, used this same method three days earlier while touting the slowdown in inflation at an investment forum in Moscow. "I remind you, dear colleagues, that a year ago, at the beginning of 2015, year-over-year inflation stood at 15.7 percent. And now it’s at 6.4 (percent). We are seeing clear progress," Putin said.

It does look possible that the 2016 calendar year could see record-low inflation in Russia compared to previous calendar years since 1992, the first year that the country began tracking inflation. Russian Finance Minister Anton Siluanov told federal lawmakers in Moscow on October 17 that his ministry expects inflation for calendar year 2016 to stand at 5.8 percent, which would beat modern Russia’s historic low for calendar-year inflation, achieved in 2011 with 6.1 percent. The International Monetary Fund projected in early October that the 2016 calendar-year rate would be 5.9 percent. A Reuters consensus poll in early October gave a projection of 6.1 percent, while adding that Russia's central bank next year "will struggle to meet its 4 percent inflation target."

Medvedev's comments came amid a string of recent statements by Russian officials painting optimistic portraits of the country’s economic prospects. Citing in part the slowing of inflation, Putin told the investment forum last week that Russia has succeeded in achieving "macroeconomic stabilization." Of course, it is possible that Medvedev simply misspoke and/or got ahead of himself in his October 17 remarks. Two weeks earlier, in an interview with Russian state television, he left himself more wiggle room regarding possible record-low inflation for calendar year 2016 (emphasis ours).

"The results of this year could possibly give us the lowest inflation rate in (Russia's) entire modern history," he said.