*
This content was produced in Russia where the law
restricts
coverage of Russian military operations in Ukraine.
(Adds economy ministry annual inflation data, paragraph 5)
MOSCOW, March 1 (Reuters) - Russian consumer prices
declined over the last week for the first time since September,
data from the state statistics service Rosstat showed on
Wednesday, easing inflationary concerns flagged by the central
bank.
The Bank of Russia has become more hawkish this year,
warning as it held its key rate at 7.5% last month that further
widening of the country's budget deficit may compel it to raise
the cost of borrowing.
Consumer prices fell 0.02% in the week to Feb. 27, Rosstat said, compared with an increase of 0.06% in the previous week. Since the start of the year, prices have risen 1.28%, a slower pace than in the same period of 2022, Rosstat said. The main deflationary factors were lower prices for fruit and vegetables, which fell 0.8% after a 1.2% increase the week before, and air fares. The cost of an economy ticket dropped 3.7% after a 5.5% rise the week before.
Separately, the economy ministry said inflation was running at an annualised rate of 11.01% as of Feb. 27, down from 11.36% a week earlier. Inflationary pressure remains elevated, with inflationary expectations for the year ahead among Russian households, an indicator the central bank watches closely, edging higher in February to 12.2%, data showed on Monday. That rise means the central bank will have to maintain its tough rhetoric at its March 17 meeting, said CentroCreditBank economist Evgeny Suvorov. "Whether or not a rate hike will take place will depend on the final inflation outcome for February," he added.
Russian households regularly cite inflation as a key concern, with many having no savings, after a decade of economic crises while rising prices dragged living standards down across the country. Russia's annual inflation rate in 2022 was 11.9%, almost three times the government's official 4% target. The central bank forecasts inflation will be 5%-7% this year, falling to 4% in 2024. A Reuters poll on Wednesday showed that the Bank of Russia was not expected to find room to cut interest rates in 2023 as increased budget spending has raised inflation risks, consigning the country's economy to a second year of contraction. (Reporting by Alexander Marrow and Darya Korsunskaya; Editing by Tomasz Janowski and Alex Richardson)
