Russian households reduced their one-year inflation expectations to 13.1% in February, down from 13.7% in January, according to data released by the central bank. The gauge, which captures how households anticipate consumer prices will change over the coming year, had been climbing since October after the government raised value-added tax from 20% to 22%.
The VAT increase took effect at the start of the year and coincided with a noticeable uptick in inflation. The central bank described that early-year acceleration as a one-off effect and has said that overall price growth should stabilise following the initial impact.
Last Friday the central bank reduced its key policy rate by 50 basis points to 15.5% and indicated that further cuts are possible. On the recent expectation reading, the bank said in a comment on the latest data: "February's decline in inflation expectations suggests that households see January's inflation acceleration as temporary and driven by one-off factors, and expect more moderate price growth going forward."
Market analysts interpreted the fall in expectations as widening the central bank's room to loosen policy. Sofya Donets, chief analyst at T-Bank, noted the VAT rise had captured attention as a major trigger for the earlier jump in forecasts, but said the VAT effect "dropped out of expectations faster."
Observers had earlier questioned the central bank's ability to continue cutting rates after the spike in inflation, since lower rates are viewed as a tool to support a slowing economy and help restore growth. Denis Popov of PSB Bank said: "A systemic decline in inflation expectations provides fairly strong arguments in favour of a further cut in the key rate at the next meeting on March 20."
The expectations indicator carries extra weight in Russia's policy debate because many consumers distrust official statistics and perceive some prices to be rising more quickly than reported. The public debate has recently highlighted food items, with cucumbers cited as an example of goods that appear to be inflating faster than headline numbers suggest.
While the February reduction in household inflation expectations points toward more policy flexibility, the situation retains elements of uncertainty tied to how temporary tax-driven effects unwind and how public perception of prices evolves. The central bank's recent rate cut and its signal that rates could fall further now sit alongside household survey evidence that some of the early-year inflation acceleration has been viewed as transitory.