Russian Fuel Price Surge Added 0.5 Percentage Points to Inflation in June-July, Central Bank Says

A surge in domestic fuel prices contributed a combined 0.5 percentage points to Russia's consumer inflation in June and the first half of July, the country's central bank disclosed in minutes from its recent policy meeting.

The central bank attributed the price pressure to widespread fuel shortages that followed Ukrainian drone attacks on Russian oil refineries, which disrupted domestic supply chains.

Inflation Breakdown and Outlook

According to the minutes from the July 24 meeting, the inflationary impact from fuel was significant over the six-week period:

• June: Higher fuel prices added approximately 0.3% to consumer price growth.
• First Half of July: The trend continued, adding an additional 0.2%.

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The regulator stated that it expects the total direct and indirect inflationary effect from the fuel price increases will not exceed 1.5% for the full year. The shortages led to long lines at filling stations and price rationing in several Russian regions, though authorities have reported that the situation has since stabilized in many areas.

Monetary Policy Response

Despite the spike in inflation, the central bank proceeded with a monetary policy easing on July 24, cutting its benchmark interest rate to 14% from 14.25%. The rate cut occurred even as the bank acknowledged the inflationary pressures from the refinery attacks and disruptions to e-commerce warehouses.

The meeting minutes revealed that most board members saw potential for additional rate cuts later this year. However, the central bank also noted that the scope for further easing had narrowed, signaling a more cautious approach ahead as it balances inflation risks with its broader economic objectives.