CBR Quarterly Inflation Review - Q4 2005
Central bank: cbr | Type: quarterly_review | Date: 2005-12-31

THE CENTRAL BANK
OF THE RUSSIAN FEDERATION
(BANK OF RUSSIA)
Quarterly
Inflation
Review
2005 Q4
Research and Information Department
Introduction........................................................... 1
Inflation Dynamics ................................................... 3
Quantitative and Qualitative Monetary Indicators .......... 17
Statistical Addendum ............................................. 25
1 2005 Q4
Inflation Dynamics
Introduction
Consumer price inflation slowed to 10.9%
in 2005 from 11.7% a year earlier.
As consumer prices until May 2005 rose
faster than in 2004, the annualised inflation rate
that month accelerated by 2.1 percentage points,
as compared with December 2004.
Consumer price inflation in 2005 was ad-
versely impacted by significant growth in service
prices, including the prices regulated at the re-
gional and municipal levels. To stem their growth,
the Russian parliament made amendments to the
Federal Law on the Principles of Administering
Housing and Utility Prices and the Federal Tariff
Service issued an order setting limits on growth in
housing and utility prices for each region. The strict
compliance with these standards will help prevent
the unjustified raising of prices and favourably
affect the overall consumer price dynamics.
The continued growth in the world price of
oil in 2005 led to significant increases in energy
prices in many countries. It was a major factor of
inflation in the eurozone and the United States.
In Russia, high oil prices led to considerable
growth in petrol prices in 2005. A temporary ban
imposed in September 2005 by the leading Rus-
sian oil companies on petrol price growth until the
end of the year somewhat mitigated this process.
As a result, petrol prices in 2005 grew more slowly
than in 2004.
The measures taken by the Russian Govern-
ment and Bank of Russia to reduce inflation pro-
duced the desired result. In the third quarter of
2005, consumer prices gained 0.6% against 1.8%
in the same period of 2004 and in the fourth quar-
ter the difference was 1.3 percentage points. As a
result, in 2005 as a whole inflation slowed by 0.8
percentage points year on year.
The slowing of inflation was due to the con-
siderable reduction of core inflation, which testi-
fies to the positive effect on price dynamics of the
factors controlled by the Bank of Russia policy.
At the same time, core inflation in Russia is
so structured that it is becoming less susceptible
to growth in the money supply. Unlike the situa-
tion in other countries, in Russia food products
with their volatile prices account for the largest
part of core inflation and in the Consumer Price
Index as a whole. Growth in food prices in 2005
slowed more significantly than in non-food prices
and this factor made a significant contribution to
the reduction of inflation.
In the early months of 2005 the trend to-
wards the slowing of the annualised rate of
growth in the M2 aggregate, which was registered
in 2004, continued. As money supply growth ac-
celerated in the second and third quarters of 2005,
the money supply growth projection for 2005 was
exceeded. In the fourth quarter the monetary dy-
namics slowed down. Allowing for the lags that
had formed by the end of 2005, the money sup-
ply dynamics along with other factors will deter-
mine the monetary conditions of inflation in Feb-
ruary-September 2006. If the annualised money
supply growth continues to slow down, the ef-
fect of the monetary conditions on inflation may
decrease and become moderate from the middle
of 2006. However, this does not rule out the cu-
mulative effect of the accelerated money supply
growth in the second and third quarters of 2005,
which may provoke price growth over a longer
period.
The monetary regulation measures taken
and the increased role of the Russian
Government’s stabilisation fund helped sterilise a
large part of excess liquidity. In addition, the low-
liquidity ruble components (time deposits) ac-
count for most of growth in the ruble supply and
this represents a significant factor from the view-
point of alleviating the inflationary consequences
of monetary growth. At the same time, the trend
towards the contraction of cash in the M2 struc-
ture, registered for most of the period under re-
view, exerts a favourable influence on inflation
dynamics and the velocity of money.
As the sterilising role of the stabilisation
fund increased, the role of the Bank of Russia in-
struments used to sterilise excess liquidity some-
what decreased in 2005. At the same time, credit
institutions’ demand for these instruments was
unabated during the year. The principle instru-
2005 Q4
ments used by the Bank of Russia to absorb spare
banking sector liquidity were the daily deposit
operations conducted on standard terms and con-
ditions at fixed interest rates, deposit auctions, the
sale of government securities from the Bank of
Russia’s own portfolio without a commitment of
reverse repurchase and operations with Bank of
Russia bonds (OBR). At the same time, there were
periods when credit institutions’ demand for Bank
of Russia refinance instruments increased. Liquid-
ity shortages were mostly eliminated by conduct-
ing repo operations, extending intraday and over-
night loans, carrying out currency swap operations
and providing Lombard loans.
3 2005 Q4
Inflation Dynamics
Consumer prices
According to the Federal State Statistics Ser-
vice (Rosstat), consumer prices rose 10.9% in
2005 against 11.7% in 2004.
In the fourth quarter of 2005 inflation stood
at 2.1% (against 5.3% in Q1, 2.6% in Q2 and 0.6%
in Q3). However, in October consumer prices
gained 0.6% month on month, in November 0.7%
and in December 0.8%.
The slowing of inflation in 2005 was due to
the significant reduction of core inflation, which
stood at 8.3% in 2005 against 10.5% in 2004. In
the fourth quarter, the prices of goods and ser-
vices included in the calculation of core inflation
rose 1.9% (against 2.4% in Q1, 1.9% in Q2 and
1.8% in Q3).
Growth in the prices of goods and services
included in the calculation of the base consumer
price index in 2005 accounted for an estimated
6.6 percentage points, or 60.5%, of overall con-
sumer price growth (against 8.5 percentage
points, or 72.0%, in 2004).
Unlike 2004, the year 2005 saw food price
growth slow down significantly. Food prices, ex-
cluding vegetable and fruit prices, gained 9.1%
in 2005 against 13.1% in 2004. Fourth-quarter
price growth stood at 1.8% (Q1 growth was 3.1%,
Q2 growth 2.4% and Q3 growth 1.6%). Growth
in food prices, excluding vegetable and fruit prices,
accounted for an estimated 3.8 percentage points,
or 35.2%, of overall consumer price growth
(against 6.1 percentage points, or 52.1%, in 2004).
The most significant growth in prices in 2005
was registered in meat and poultry prices, which
rose 18.6% (against 19.6% in 2004). Growth in
poultry prices accelerated considerably in 2005 as
compared with 2004 (18.2% against 1.1%). Poul-
try prices in 2005 rose faster than pork prices but
slower than beef prices. It appears that as domes-
tic production and imports increased, meat and
poultry price dynamics were affected by the shift
in consumer demand in favour of cheaper poultry
throughout the whole year. At the end of 2005,
demand for poultry fell due to the bird flu scare
and poultry prices went down 1.5% in November
and 1.7% in December.
In 2004 Russia began to set quotas in meat
imports in order to stimulate domestic production
and protect it from foreign competitors. The con-
tinuation of considerable growth in meat and
poultry prices serves to show that the imbalances
in demand and supply remain. Nevertheless, it is
an objective process connected with inadequate
development of the domestic market. On Decem-
ber 5, 2005, the Russian Government passed
Resolution No. 732, which for the first time set
Inflation Dynamics
2005 Q4
Food price inflation rates (%)
Growth (December 2005
on December 2004)
Growth (December 2004
on December 2003) Outcome
Bread and bakery products 3.0 16.7 Retardation by 5.6 times
Cereals and legumes 0.2 11.6 Sharp retardation
Pasta 1.9 14.6 Retardation by 7.7 times
Meat and poultry 18.6 19.6 Retardation by 1.1 times
Fish and seafood 12.7 11.5 Acceleration by 1.1 times
Milk and dairy products 10.5 12.8 Retardation by 1.2 times
Butter 8.2 6.8 Acceleration by 1.2 times
Sunflower oil 2.1 2.1
Granulated sugar -0.1 7.5
Alcoholic beverages 7.6 8.7 Retardation by 1.1 times
Consumer price inflation (%)
Growth (December 2005
on December 2004)
Growth (December 2004
on December 2003) Outcome
Prices of goods and services included in core inflation calculation 8.3 10.5 Retardation by 1.3 times
of which:
food prices, excluding vegetable and fruit prices 9.1 13.1 Retardation by 1.4 times
non-food prices 6.4 7.4 Retardation by 1.2 times
Prices of paid services provided to households 21.0 17.7 Acceleration by 1.2 times
of which:
prices of goods and services administered at regional or municipal level 23.9 19.6 Acceleration by 1.2 times
Vegetable and fruit prices 14.3 3.3 Acceleration by 4.3 times
meat import quotas for four years in advance. This
may help foreign trade companies to implement
a more balanced policy in respect to imports, cush-
ioning undesirable supply-related market fluctua-
tions.
According to Rosstat, domestic meat pro-
duction in 2005 increased 2.9% year on year. Meat
imports continued to grow amid moderate growth
in the contract prices of imported meat. In Janu-
ary-November 2005, imports of meat (net of
poultry) increased 33.3% as compared with the
same period of 2004, while poultry imports rose
23.0%. Growth in beef imports was largely due
to the reduction from 60% to 40% of import du-
ties on beef imported in excess of the established
quotas. Imports of beef in excess of the quota in-
creased more than 1.7 times over in the 11 months
of 2005, as compared with the same period in
2004, and surpassed by far beef imported in ex-
cess of the quota during the entire year 2004. In
the 11 months of 2005, the contract prices of beef
rose 1.6% on average, as compared with the same
period of 2004, poultry 6.0% and pork 7.0%.
There was a considerable rise in the prices
of fish and seafood (12.7%) and milk and dairy
products (10.5%). In 2004 the prices of these
products rose 11.5% and 12.8%, respectively.
Granulated sugar was the only major food
product whose price fell (by 0.1%) in 2005 (in
2004 the price of granulated sugar rose 7.5%).
These price dynamics differed from those of the
world’s sugar markets. Sugar prices continued to
rise on the world market in 2005. According to the
London Commodity Exchange’s data, the price of
raw sugar rose 35.4% in December 2005 relative
to December 2004 and the price of refined sugar
5 2005 Q4
Inflation Dynamics
Major meat and poultry market indicators (% growth)
Meat and poultry Beef Pork Poultry
2005 2004 2005 2004 2005 2004 2005 2004
Meat production (January-December as % of January-December of previous year) 2.9* 5.9*
Livestock** and poultry production (January-December as % of January-December of previous year)
- by farms of all categories; -1.7 0.7
- by agricultural enterprises 1.8 1.5 -11.9 -7.8 -1.1 -5.0 17.7 17.6
Imports*** (January-November as % of January-November of previous year)
- volume 27.9 -9.5 37.1 9.6 28.2 -19.1 23.0 -10.1
- value 35.9 0.4 39.3 27.6 37.2 -7.3 30.4 -7.8
Prices (November as % of December of previous year)
- producer prices 12.0 22.0 18.0 33.8 2.3 41.5 17.5 -0.5
- livestock and poultry selling prices 15.2 23.6
- consumer prices 18.6 19.6 23.6**** 26.3**** 18.2**** 34.0**** 18.2 1.0
- import prices*** 12.0 2.4 5.7 4.3 6.8 8.2 3.2 -2.2
Livestock population** as of end of month (December as % of December of previous year) -6.1 -7.8 -1.2 -16.1
* Including first-grade by-products.
** Cattle and swine.
*** Estimate based on Rosstat's updated figures.
**** Excludin
g boneless meat.
was up 33.5% (a year earlier sugar prices increased
40.0% and 22.2%, respectively).
The most significant slowing of price growth
in December 2005 as compared with December
2004 was registered in bread and bakery products
(by 5.6 times), pasta (by 7.7 times) and cereals
and legumes, which was partly due to the fall in
agricultural producer prices. Grain producer prices
dropped 14.1% in 2005, whereas in 2004 they rose
11.7%.
Some foodstuffs, such as meat, fish, bread
and bakery products, pasta and cereals, sugar and
confectionery, are characterised by significant
price volatility. If we exclude these volatile com-
ponents from the consumer goods basket used in
calculating the basic consumer price index, its
growth in 2005 will be estimated at 7.5%, or 0.8
percentage points down on core inflation (in 2004
it was 8.7%, or 1.8 percentage points down on
core inflation).
In 2005 as a whole, as in 2004, food prices,
excluding vegetable and fruit prices, rose faster
than non-food prices.
Non-food prices went up 6.4% in 2005
against 7.4% in 2004. It is the smallest full-year
growth in the prices of this group of products in
the past ten years. In the fourth quarter of 2005
non-food prices increased 1.8% (against 1.1% in
Q1, 1.3% in Q2 and 2.1% in Q3). Apart from petrol,
the biggest growth in non-food prices was regis-
tered in the prices of building materials (9.1%) and
knitwear (8.6%).
Petrol price dynamics were unstable in the
first quarter of 2005, when petrol prices both went
up and came down. In the third quarter petrol price
growth accelerated, but on September 19 the top
Russian oil companies promised to freeze prices
at their filling stations. In December, the price of
petrol edged up 0.1% month on month and full-
year petrol price growth stood at 15.8% against
31.3% in 2004.
Growth in the prices of fabrics, knitted gar-
ments, footwear, clothes and underwear was
slower than in 2004. Prices of TV and radio sets
fell 0.8%.
According to estimates, growth in non-food
prices accounted for 2.1 percentage points, or
19.2% of overall consumer price growth (against
2.3 percentage points, or 19.2%, in 2004).
2005 Q4
Vegetable and fruit prices increased
14.3% in 2005 against 3.3% in 2004. However, in
2005 vegetable and fruit prices grew less than the
annualised average in 2001-2003 (18.9%).
Growth in vegetable and fruit prices accounted for
an estimated 0.6 percentage points of the gen-
eral rate of inflation (5.4% of overall consumer
price growth). In 2004, growth in vegetable and
fruit prices accounted for 0.1 percentage points,
or 1.2%, of overall consumer price growth.
Overall growth in food prices in 2005
stood at 9.6% against 12.3% in 2004. In the fourth
quarter of 2005 food prices increased 2.3%
(against 4.9% in Q1 and 3.5% in Q2; in Q3 they
fell 1.4%).
Service prices rose 21.0% in 2005 against
17.7% in 2004. In 2005 Q1 service prices increased
12.6%, in Q2 2.6%, in Q3 2.6% and in Q4 2.2%.
The biggest increase in 2005 was registered in
housing and utility prices, which rose 32.7%
against 23.5% in 2004. The price of housing was
up 36.1% and that of utilities 31.5%. The amend-
ments to the Federal Law on the Principles of
Regulating Tariffs Set by House Maintenance and
Utility Services and the Federal Tariff Service’s Or-
der No. 853-e/4, dated December 29, 2005, came
into force in 2006, setting limits on growth in
housing and utility charges for each region and
establishing the procedure for monitoring their
dynamics. As for other major types of services, the
most significant increase was registered in 2005
in pre-school tuition fees, which rose 32.1%
against 21.6% in 2004.
Growth in service prices in 2005 exceeded
by 2.6 times overall growth (by 8.2%) in the prices
of goods (1.7 times in 2004). According to esti-
mates, growth in service prices in 2005 accounted
for 4.4 percentage points, or 40.2%, of overall
consumer price growth (3.2 percentage points, or
27.5%, in 2004). At the same time, service prices
regulated at the regional and municipal levels rose
by an estimated 23.9% in 2005 against 19.6% in
2004.
7 2005 Q4
Inflation Dynamics
The last few years have seen a sustained
trend towards the reduction of the sample aver-
age and median. The median, which in this kind
of distribution characterises growth in the prices
of most of the goods and services in 2005, stood
at 8% against 8.5% in 2004, while the average
decreased by 0.2 percentage points year on year,
to 9.6%. The standard deviation, characterising
the extent to which price increases differed from
the average, increased to 8.8% from 7.9% a year
earlier and reached the 2003 level. The dispersion
of price increases expanded despite the fact that
the standard deviation in the commodity groups
decreased by 1.3 times in non-food products and
1.2 times in food products. The increase in the stan-
dard deviation for the sample as a whole was due
to the fact that the standard deviation in the ser-
vices sector grew by 1.7 times and also the signifi-
cant difference between the average price in-
creases in the services sector (16.2%) and the non-
food products sector (6.7%). A year earlier the
respective percentages were 14.1% and 7.5%. In
2005 the median was the highest in the services
sector and the lowest in the non-food products
sector.
The statistical analysis of price increases in
the food products sector has shown that in 2005
the distribution average and median increased as
The analysis of the distribution
1 of con-
sumer price increases (December on December
of previous year) in 2002-2005 was made for a
sample comprising more than 400 consumer
goods and services without taking into account
their weights in consumer spending.
Throughout the past two years increases in
the prices of more than a half of all consumer
goods and services have not exceeded 2-10% (6-
14% in 2002-2003).1 This distribution has been built on the basis of a smoothed histogram. The length of the interval (4 percentage points) was
selected so that each interval included a sufficient number of observations, while the histogram reflected the qualitative charac-
teristics of the sample distribution.
2005 Q4
compared with the previous year. More than two-
thirds of all food products were in the 2-14% price
growth range in 2005.
The distribution of price increases in the
non-food products sector is characterised by a
pronounced maximum and small standard devia-
tion. Consequently, the increases in the prices of
most of the goods in this group stay within a nar-
row range. The goods whose prices rose in the 2-
10% range in 2005 accounted for 78% of all non-
food products (73% in 2004). There were few
goods (2.2% of the total in 2005 against 4.4% in
2004) whose prices rose more than 18% in 2005.
The standard deviation declined by 1.3 percentage
points to 4.9% as price differences decreased
within this group of commodities.
The distribution of service price increases in
2005 had a peak that corresponded to the 14-18%
price growth range. The range of increases in the
prices of most of the paid services provided to the
population remained virtually unchanged. How-
ever, the share of services whose prices increased
more than 34% expanded to 7.5% in 2005 against
1% in 2004. The share of services whose prices
changed slightly increased 70% in 2005 year on
year, to almost 10%. As a result of this price dis-
tribution, the standard deviation in 2005 increased
by 4.4 percentage points year on year, to 12.6%,
but it was 0.4 percentage points down on 2002.
According to Rosstat data, in most of
Russia’s federal districts consumer prices in
2005 grew less than in 2004. The exceptions were
the Southern, Urals and Far Eastern Federal Dis-
tricts. In the North-Western, Southern, Urals and
Far Eastern Federal Districts consumer prices rose
faster than in Russia as a whole by 0.3 percentage
points, 1.2 points, 0.8 points and 2.4 points, re-
spectively.
While in 2004 the differences between the
various Russian regions and territories in terms of
the cost of a fixed set of goods and services used
by the Federal State Statistics Service to compare
the purchasing power of the population by region
decreased, in 2005 this trend changed. The re-
gional difference ratio
2 increased to 45.8% in
2005 against 41.5% in December 2004 as the Far
Eastern Federal District, which has the most ex-
pensive basket, registered the most significant
growth in its price.
Vegetable and fruit price increases differed
most significantly by region. In the Southern Fed-
eral District, for instance, vegetable and fruit
prices gained 19.9%, whereas in the Urals Federal
District they rose 5.1%. In the meantime, growth
in non-food prices and food prices, excluding veg-
etable and fruit prices, was roughly the same in
all regions.
Growth in service prices accelerated consid-
erably in 2005 year on year in all regions except
the Volga Federal District. The most significant
increase in service prices was registered in the
Southern and Far Eastern Federal Districts (8.1
percentage points and 9.8 percentage points, re-
spectively, against 3.3 percentage points in Rus-
sia as a whole). At the same time, in the Volga
Federal District growth in service prices slowed
down by 0.4 percentage points year on year.
According to data provided by the Institute
of the Economy of the Transitional Period, the in-
flationary expectations of managers of the lead-
ing industrial enterprises in 2005 were on average
a little lower than in 2004. Thus, 17-42% of re-
spondents predicted growth in selling prices in
2005 against 24-40% in 2004. The first ten
2 The regional difference ratio is calculated as the difference between the cost of a fixed set of goods and services in the mos t
expensive and the cheapest regions relative to the national value of the same set.
9 2005 Q4
Inflation Dynamics
months of 2005 saw the inflationary expectations
decline (from 38% in January to 18% in October)
due to significant growth in the prices of prod-
ucts in the main types of activity in the early
months of 2005. At the end of 2005, as at the
end of 2004, the inflationary expectations in-
creased significantly. While in November 29% of
respondents predicted growth in the prices of their
products, in December 42% of respondents did
so. This may serve as an indication that seasonal
price growth will accelerate in the beginning of
2006.
Producer Prices
Industrial producer prices gained 13.4% in
2005 against 28.8% in 2004. The main contribu-
tion to producer price growth (6.1 percentage
points, or 45.8%) was made in 2005, as in 2004
(12.9 percentage points, or 44.8%), by growth in
producer prices in the mining sector. Growth in
producer prices in this sector was 2.3 times faster
than in industry as a whole (31.0%), while fuel and
energy producer prices rose 35.3% (64.7% and
69.7% in 2004).
In 2005 the most significant producer price
growth in the manufacturing sector was regis-
tered in the production of petroleum products
(26.7%) and other non-metal mineral products
(16.7%). In 2004 these indicators stood at 50.6%
and 15.8%, respectively.
Competition, especially by importers, con-
tinued to affect price formation in the manufac-
turing sector, which is largely oriented to con-
sumer demand. This became apparent as producer
prices in the production of food, including bever-
ages, tobacco, textile and clothing and leather,
leather goods and footwear in 2005 grew more
slowly than in the manufacturing sector as a
whole. In the last two manufacturing industries
there was a fall in output in 2005 as compared with
2004.
In the manufacturing industries whose out-
put goes to the consumer goods market, there was
no acceleration in price growth in 2005 as com-
pared with 2004. In December 2005, as compared
with December 2004, growth in the producer
prices of foodstuffs, including beverages, and
tobacco slowed to 4.0%, in textile and clothing
production to 4.2% and in the production of
leather, leather goods and footwear to 5.6%. In
2004, producer prices in these types of activity
rose 11.1%, 8.6% and 8.4%, respectively.
It has been estimated that growth in pro-
ducer prices in industries whose output goes di-
rectly to the consumer goods market in 2005 ac-
counted for 2.9 percentage points of growth in
the prices of goods and services included in the
calculation of core inflation (6.7 percentage points
in 2004).
Producer prices in the production, transmis-
sion and distribution of electricity in 2005 rose
11.5% against 12.5% in 2004, freight transporta-
tion charges increased 16.6% against 9.3% and
railway fares went up 13.3% against 12.6%.
2005 Q4
There has been moderate growth in com-
munication fees for corporate entities over the
past two years. After their fall in 2003 by 2.7%,
they rose 1.9% in 2004 and 2.2% in 2005.
Growth in the prices of building materials
slowed to 12.1% in 2005 from 14.9% in 2004, de-
spite the considerable acceleration of growth in
cement prices (from 14% to 36.3%).
Agricultural producer prices rose 3.0% in
2005 against 17.7% in 2004, that is, slowed down
by 5.9 times. The slowdown was due to the fall in
crop growers’ prices and the slowing of livestock
breeders’ prices.
Despite significant growth in vegetable and
potato producer prices, crop growers’ prices de-
creased 6.1%, mainly due to the fall in grain grow-
ers’ prices, which declined 14.1%, whereas in 2004
these prices rose 12.5% and 11.7%, respectively).
Livestock breeder prices rose 9.0% in 2005
against 21.1% in 2004, mainly due to the increase
in cattle and poultry producer prices, as was the
case a year earlier. In 2005, prices of these prod-
ucts increased 15.2% against 23.6% in 2004. Egg
producer prices were down 13.8% in 2005,
whereas in 2004 they rose 29.5%.
Demand
Domestic demand
Russia’s GDP expanded 6.4% in 2005
against 7.2% in 2004. According to estimates,
economic growth rates in Russia in 2005 were 1.5
times higher than the world economic growth
rates projected by the IMF and World Bank (4.3-
4.4%). Economic development parameters in
2005 were primarily determined by the consumer
and investor components of domestic demand.
Growth in spending on household sector fi-
nal consumption stood at 11.1%, exceeding the
2000-2004 annual average by 1.3 times. Sustained
economic growth and the increased social guar-
antees provided by government contributed to the
continued rapid growth in real disposable money
income in 2005 (8.8%), which ensured a high level
of consumer expenses. Thus, spending on house-
hold sector final consumption grew faster than
income, increasing the inflationary pressure on the
consumer goods market.
11 2005 Q4
Inflation Dynamics
Growth in household sector money income
stimulated the expansion of retail trade turnover,
in which sales of non-food products grew faster
than sales of food products. The average
annualised rate of inflation on the consumer food
market in 2005 was faster than growth in non-
food prices. As non-food price growth slowed and
the living standards rose in 2005 compared to
2004, the level of retail sales of these products
remained high.
Government expenditures on final con-
sumption increased 1.8% in 2005 against 2.1% in
2004. The tight government spending policy was
a major factor of price control in 2005.
Gross capital formation increased 11.4% in
2005 against 11.6% in 2004 and fixed capital in-
vestment grew 10.5%. In 2005, as in 2004, the
biggest investments were made in transport and
communications and the manufacturing and min-
ing sectors (according to data for the first nine
months of 2005, investments in these types of
activity accounted for 60.9% of total fixed capi-
tal investment by large and medium-sized com-
panies). The share of the manufacturing sector in
total investment expanded from 18% in January-
September 2004 to 19% in the same period of
2005, while the share of fuel and energy produc-
tion contracted from 16.9% to 14.6%.
In the past few years the structure of fixed
capital investment by type has been characterised
by a fairly large share of investments in the active
part of fixed assets (in January-September 2005
it stood at 36.8% against 38% in the same period
of 2004). Considerable investments in machinery
and equipment facilitated the technical retooling
of fixed assets and became a major factor of
growth in labour productivity and created condi-
tions for price control.
Net exports of goods and services declined
13.4% in 2005 (in 2004 they fell 10.3%) as im-
ports grew considerably faster than exports. Im-
ports continued to rise rapidly in 2005, although
not as fast as in 2004 (16.2% against 22.2%, re-
spectively), while exports expanded 5.6% against
11.9% in 2004.
The dynamics of the various elements of
GDP final consumption testify to the changed role
of domestic and foreign demand in overall eco-
nomic growth. The contribution of the domestic
factors to GDP growth continued to increase in
2005. According to estimates, a large part of GDP
growth was due to increase in household sector
consumer expenses. Gross capital formation’s
contribution to GDP dynamics increased as com-
pared with the previous year, while net exports’
contribution to GDP dynamics was negative, slow-
ing the rate of economic growth.
Foreign demand
World economy and international financial
markets
World economic growth continued in 2005,
although it was slower than in 2004. According
to IMF and World Bank estimates3, the world pro-
duction of goods and services increased 4.3-4.4%
against 5-5.1% in 2004. The main reason for the
slowing of world economic growth in 2005 was
the increase in the world market price of oil, which
far surpassed the price levels registered in the pe-
riods of greatest instability on the world oil mar-
ket in the late 1970s and early 1980s and in 2004.
According to preliminary data, US real GDP ex-
panded 3.5% in 2005 against 4.2% in 2004.
Eurozone GDP growth is estimated by the IMF and
World Bank at 1.1-1.2% against 2.1% in 2004. Ac-
cording to preliminary data released by China’s
State Statistical Bureau, in 2005 the Chinese
economy grew 9.9% against 10.1% in 2004.
3 World Economic Outlook (IMF), September 2005; Global Economic Prospects (World Bank), November 2005
2005 Q4
The US trade deficit increased by $99 bil-
lion in January-November 2005 as imports grew
faster than exports. The deficit in US trade with
China, for example, expanded 25% to one-quar-
ter of the United States’ total trade deficit. Growth
in US domestic demand stimulated the economies
of the United States’ trading partners. China and
the member countries of the EU, NAFTA and OPEC
increased sales on the US market. At the same
time, the increased imbalance in US-China trade
had a negative effect on trade and the economies
of the United States’ less competitive trading part-
ners (specifically, Chinese producers forced other
Asian producers from the US engineering prod-
ucts market). A bumper harvest reduced China’s
needs in imported foodstuffs, while the lifting of
multilateral quotas in textile trade stimulated Chi-
nese textile exports. These factors along with the
increased exports of Chinese machinery and
equipment led to a sharp rise in China’s trade sur-
plus in 2005, which expanded by almost $70 bil-
lion year on year, according to preliminary data.
In the eurozone, imports grew faster than exports,
causing the trade surplus to contract.
US inflation stood at 3.4% in December
2005 as compared with December 2004 (in De-
cember 2004 it stood at 3.3%). Core inflation
4 was
the major factor of the change in the general level
of consumer prices in the United States in the pe-
riod under review. The second most important
factor was growth in energy prices. Core inflation
had a decisive effect on the change in the general
level of consumer prices in the United States in the
first half of 2005 and growth in energy prices in
the period from July to October, while in Novem-
ber both factors had the same effect.
Growth in food prices made a comparatively
small contribution to the change in the general
level of US consumer prices throughout 2005.
Food prices rose 2.3% in December 2005 year on
year (against 2.7% in December 2004). The slow-
down in food price growth was largely due to the
stabilisation of vegetable and fruit prices, which
increased 0.6% in December 2005 year on year
against 7.9% in December 2004. The prices of
animal food products, except milk and dairy prod-
ucts, gained 1.4% against 1.1% in December 2004.
US core inflation stood at 2.2% in Decem-
ber 2005 as compared with December 2004 (in
December 2004 it also stood at 2.2%). By and
large, there is reason to believe that the raising of
the interest rates by the Federal Reserve in 2005
proved to be an effective means of containing core
inflation. A minor year-on-year rise in the general
level of consumer prices in 2005 (December on
December) amid stable core inflation in the United
States was the result of growth in the price of en-
ergy used for household needs.
Eurozone inflation stood at 2.2% in De-
cember 2005 as compared with December of the
previous year (in December 2004 it was 2.4%).
The most important factor of eurozone inflation
was the 11.2% increase in energy prices (in Decem-
ber 2004 energy prices rose 7%). The second most
important factor was core inflation
5. Motor fuel
and lubricant prices rose 13.5% against 11.1% in
December 2004 and the price of energy used in
the household sector gained 8.5% against 2.4%
a year earlier. Food price growth accelerated to
1.2% in December 2005 year on year from 0.5%
in December 2004. Vegetable and fruit prices rose
1.1% (in December 2004 they fell 2.1%) and prices
of meat and meat products gained 1.2% against
1.5% in December 2004.
4 Core inflation in the United States signifies growth in the prices of goods and services included in the consumer goods basket,
except foodstuffs and energy products.
5 Core inflation in the eurozone countries is growth in the prices of goods and services included in the consumer goods basket,
excluding foodstuffs, alcoholic beverages, tobacco and energy products.
13 2005 Q4
Inflation Dynamics
Eurozone core inflation slowed to 1.3% in
December 2005 as compared with the same pe-
riod a year earlier (in December 2004 it stood at
1.9%). The fundamental economic factors did not
create any objective conditions conducive to the
acceleration of inflation in the eurozone in 2005.
Nevertheless, in late 2005 the European Central
Bank (ECB) raised the refinance rate for the first
time in three years. It did so because in some
months of 2005, especially in September and Oc-
tober, growth in energy prices caused eurozone
inflation to exceed by far the medium-term tar-
get the ECB seeks to achieve through its monetary
policy (the ECB is set to keep inflation close to con-
sumer price growth of 2% in each reporting month
relative to the same month of the previous year).
As for the emerging market countries,
which account for substantial portions of Russia’s
trade turnover, inflation slowed down signifi-
cantly in December 2005 year on year in Belarus
(to 8% from 14.6% in December 2004), Poland
(to 0.6% from 4.4%), Slovakia (to 3.7% from
6%), Hungary (to 3.5% from 5.6%), Ukraine (to
10.3% from 12.3%), Brazil (to 5.7% from 7.6%),
China (to an estimated 1.6% from 2.4%) and Tur-
key (to 7.7% from 9.3%). The reduction of infla-
tion in China was due to the significant slowing of
growth in food prices, caused by growth in the
supply of foodstuffs on the domestic market as a
result of a good harvest and the expansion of live-
stock production (in 2004 China had a bad har-
vest, which led to a rise in food prices and forced
the country to import food). Inflation accelerated
in India to 5.6% from 3.8% in December 2004 and
in Kazakhstan to 7.5% from 6.7%.
The US Federal Reserve raised the bench-
mark overnight interbank interest rate (fed-
eral funds rate) eight times in 2005: from 2.25%
to 2.5% in February, 2.75% in March, 3% in May,
3.25% in June, 3.5% in August, 3.75% in Septem-
ber, 4% in November and 4.25% in December. In
2004 the federal funds rate was raised by 1.25
percentage points. Since December 2004 it has
exceeded the ECB’s refinance rate, which in De-
cember 2005 was raised from 2% to 2.25%.
LIBOR rates on US dollar-denominated
deposits with terms from one month to one year
increased by 1.8-2.0 percentage points in Decem-
ber 2005 year on year. The yield on two- and
three-year US treasuries rose by 1.2-1.4 percent-
age points and the yield on five- and ten-year trea-
suries increased by 0.2-0.8 percentage points.
LIBOR rates on US dollar-denominated deposits
with all terms to redemption and the yield on US
treasuries with all terms to redemption in Decem-
ber 2005 were higher than LIBOR rates on euro-
denominated deposits and the yield on eurozone
government securities.
The US dollar appreciated against other
international reserve currencies on interna-
tional financial markets in 2005 on economic
growth in the United States, increased yield on US
dollar-denominated financial assets and the nega-
tive outcome of the EU Constitution referenda in
2005 Q4
France and the Netherlands. In December 2005
the dollar appreciated 11.4% against the euro year
on year, 12.3% against the yen and 9.4% against
the pound sterling. It also made gains against
some other currencies of importance for the
Russian economy, such as the Swiss franc, Pol-
ish zloty, Kazakhstan tenge, Swedish krona, Hun-
garian forint, Czech koruna, Slovak koruna,
Lithuanian litas, Latvian lat, Estonian kroon, Ro-
manian leu, Israeli shekel and Indian rupee. At the
same time, the dollar depreciated against the
Belarussian ruble, Chinese yuan, Ukrainian
hryvnia, Turkish lira, South Korean won and Bra-
zilian real. The People’s Bank of China on July 21,
2005, revalued the yuan by 2% to 8.11 yuan to the
US dollar.
External economic conditions
Demand for Russia’s major raw material ex-
port commodities, especially energy products, in-
creased in 2005. The major factor of growth in the
demand for oil was its increased consumption in
China and other dynamically developing countries
of Asia. According to experts’ estimates
6, the
world economy’s demand for oil increased 1.3-
1.5% in 2005, while the demand for oil in the de-
veloping countries of Asia rose by an estimated
2.0-4.1% (1.5-6.2% in China), in OECD countries
by 0.2-0.6% and other countries by 2.7-2.8%.
The sharp rise in the price of oil in 2005, as
in 2004, was largely due to the imbalance between
the rates of growth in the demand for oil and the
ability of the oil producing countries quickly to in-
crease the supply of oil on the world market. The
average price of Brent, Dubai and WTI crude in
2005 rose 41% year on year, to $53.4 per barrel
(compared to 1980, when an historical high was
registered, oil prices increased 44% in 2005).
The situation on world commodity markets
was good for Russian exporters in 2005. Growth
in the prices of major Russian export commodi-
ties
7 was the biggest in three years. The compos-
ite world price index, adjusted for the structure of
Russian exports and calculated for commodities
accounting for more than 70% of their value, reg-
istered 1.36 in December 2005 relative to the same
period of the previous year (in December 2004 it
stood at 1.25).
Energy prices rose at particularly rapid rates.
The price of Urals crude went up 50.1% in Decem-
ber 2005 year on year, to $53.9 per barrel (in De-
cember 2004 it rose 25.9%). The price of natural
gas on the European market was up 49.5% (it rose
26.2% a year earlier), fuel oil 78.6% (7.4%), die-
sel fuel 27.6% (47.8%) and premium petrol
40.8% (24.5%).
Despite increased demand, growth in non-
energy prices slowed down in 2005. In December
2005 these prices rose 9.5% on average year on
year against 24.3% a year earlier. At the same
time, ferrous metal prices went up 7.7% (against
53.9% in December 2004) and non-ferrous met-
als gained 14.3% (against 7.8%).
Food prices
8 on world markets, whose sharp
rise was a major factor of inflation in many coun-
tries in 2004, mostly steadied in 2005 but none-
theless remained high. This particularly applies to
6 Estimates by the OECD International Energy Agency, US Energy Information Administration and Organisation of Petroleum
Exporting Countries (December 2005-January 2006).
7 Average prices have been calculated on the basis of data provided daily by the following news agencies and exchanges: Reuters
for oil, Petroleum Argus for petroleum products (petrol, diesel fuel and fuel oil) and the London Metal Exchange for non-ferrous
metals (aluminium, copper and nickel). Average monthly prices of natural gas and ferrous metal price indices have been calculat-
ed on the basis of data provided by the World Bank and other goods on the basis of data provided by the IMF.
8 Average prices have been calculated on the basis of data provided daily by the London Commodity Exchange for raw and refined
sugar and average monthly prices of beef on the basis of data provided by the World Bank.
15 2005 Q4
Inflation Dynamics
meat prices, which grew in 2003-2004 and for
most of 2005. However, the trend towards growth
in meat prices began to change on the world mar-
ket in 2005. While in December 2003 the price of
beef rose 17.1% year on year and in December
2004 it was up 10.8%, in December 2005 it was
down 2.0%. Pork and poultry prices increased
11.5% and 12.2% in December 2003 and 48.3%
and 6.7% in December 2004, respectively,
whereas in December 2005 the price of pork fell
15.9% and poultry was down 3.2% year on year.
Sugar prices rose in 2004 and 2005 on
growth in world demand and bad weather in some
regions of the world. Sugar production and stocks
in the 2003/2004 and 2004/2005 agricultural
years contracted
9. Growth in sugar prices acceler-
ated significantly in 2005 year on year and may
become a major factor of inflation. The price of
refined sugar increased 22.2% in December 2004
year on year and 33.5% in December 2005; the
price of raw sugar rose 40.0% and 35.4%, respec-
tively.
As export prices rose faster than import
prices in Russia, the terms of Russia’s trade with
foreign countries
10 in 2005 were considerably bet-
ter than in 2004. Growth in the terms of trade in-
dex accelerated compared to 2004.
The favourable price situation on major ex-
port markets affected export dynamics signifi-
cantly. In 2005, exports grew 33.9% to $245.3
billion against $183.2 billion in 2004. The value of
fuel and energy exports (oil, petroleum products
and natural gas) increased 50%, while the value
of other exports rose 15%. Export volumes mostly
expanded slightly, while oil exports contracted
2.0% in 2005 year on year, according to Rosstat
data.
Imports increased 28.5% to $125.1 billion in
2005 against $97.4 billion in 2004. Growth in im-
ports was largely due to the expansion of import
volumes, while growth in import prices slowed
down in 2005 as compared with 2004. At the same
time, preliminary figures show that the prices of
imported investment goods fell slightly, while the
rates of growth in the contract prices of food im-
ports remained unchanged from the previous year
on average.
Thus, the dynamics of import prices in Rus-
sia had no significant upward effect on inflation.
Supply
Output dynamics influenced the change in
added value in the main types of economic activ-
ity. Compared to 2004, added value increased at
rapid rates in 2005 in construction (by 9.7%) and
wholesale and retail trade (by 12.3%). At the same
time, growth slowed down in gross added value
in transport and communications (from 10.5% to
6.1%), mining (from 7.2% to 1.8%) and manu-
facturing (from 6.6% to 4.4%). Growth acceler-
ated in gross added value in the production and
distribution of electricity, gas and water, real es-
tate operations, education, financial activities and
government.
Industrial output increased 4.0% in 2005
against 8.3% in 2004. The mining sector’s contri-
bution in overall production growth declined
slightly in 2005 due to the slowing of growth in
fuel and energy production and the reduction of
the production of other raw materials. Industrial
production growth in 2005, as in 2004, was largely
ensured by the expansion of output in the manu-
facturing sector, especially significant growth in
the production of electrical, electronic and optical
equipment, transport vehicles and foodstuffs.
In accordance with the trend calculated on
the basis of GDP dynamics in the post-crisis pe-
riod, the average annual growth in potential out-
put
11 is 6.6%. Positive in 2004, the production
gap12 corresponding to these potential output
dynamics became negative in 2005. A negative
gap indicates an excess of potential supply over
actual demand and the reduction of inflationary
pressure on the economy, which corresponds to
more significant decline in consumer price infla-
tion than in the previous year.
9 World Bank estimate, October 2005.
10 The ratio between export and import prices.
11 Potential output corresponds to the state of economic equilibrium, which does not cause inflation to accelerate, and character-
ises the supply-side potential of the economy.
12 Production gap is the difference between actual and potential outputs relative to potential output.
2005 Q4
Labour Market
The number of people employed in the
economy in 2005 continued to increase, as in 2004
(there was a fall in 2003). In 2005, the number of
jobholders rose 1.3% against 1.7% in 2004. Pro-
duction expanded faster than job numbers due to
increased labour productivity, which grew by an
estimated 5% in 2005 against 5.4% in 2004. Thus,
the intensive factors of growth remained impor-
tant, containing price growth in the economy.
Wage increased at rapid rates in 2005, faster
than labour productivity. At the same time, al-
though the gap between growth in real wage and
labour productivity narrowed in 2005 as compared
with 2004 (it widened in 2004), it remained con-
siderable, creating conditions for further price in-
creases.
The number of jobless calculated according
to the ILO methodology continued to decline and
in 2005 it fell 6% against 3.9% in 2004. As of the
end of December 2005, the total number of un-
employed accounted for 7.7% of the economically
active population (against 8.3% a year earlier.)
17 2005 Q4
Quantitative and Qualitative Monetary Indicators
Quantitative and Qualitative Monetary Indicators
Exchange rate
Against the background of favourable ex-
ternal economic conditions and considerable in-
flow of exporters’ foreign currency earnings, the
dollar/ruble rate mostly followed the changes in
the dollar/euro rate on international markets.
Over the year, although there were several
periods when the ruble appreciated against the
dollar, the dollar gained against the ruble. The
most significant gains were made by the dollar in
the period from the middle of March to the middle
of July, when the dollar appreciated by 1.37 rubles,
or 5%, whereas in the remaining periods the ex-
change rate fluctuated considerably. In 2005 the
dollar appreciated by 3.7%, or 1.04 rubles, and as
of January 1, 2006, it stood at 28.7825 rubles. The
average dollar/ruble rate fell 1.8% year on year to
28.28.
In the fourth quarter of 2005, the average
dollar/ruble rate rose 0.7%, or 19 kopecks, gain-
ing 0.6% in October, 0.7% in November and 0.2%
in December. In real terms the ruble lost (0.2%)
to the dollar in October only, whereas in Novem-
ber it appreciated by 0.8% and in December 1%.
In December there were periods of the
dollar’s considerable decline against the ruble (by
34 kopecks from December 9 to 20 and by 7 ko-
pecks from December 23 to 31). The dollar’s de-
preciation against the ruble at the end of 2005 was
caused by the corresponding changes in the dol-
lar/euro rate on international markets. The dollar’s
decline in that period was also precipitated by for-
eign exchange traders’ expectations of an end to
the FRS rate hikes.
On the domestic euro market, the euro/
ruble rate changed differently from the dollar/
ruble rate in 2005, which was also the result of
the euro/dollar dynamics on international mar-
kets. In 2005 as a whole, the nominal rate of the
euro against the ruble fell 9.7%, or 3.66 rubles,
and as of January 1, 2006, it stood at 34.1850. The
average annual rate of the euro against the ruble
was 35.26, down 1.6% on 2004.
In the fourth quarter of 2005, the nominal
rate of the euro against the ruble fell 1.9%, or 65
kopecks. Meanwhile, in October the average rate
of the euro against the ruble fell 1.4% and in No-
vember 1.2%, whereas in December the euro
gained 0.5%. The ruble/euro dynamics in real
terms mostly followed the changes in the nomi-
nal rate: in October the ruble gained 1.9% in real
terms, in November 2.1% and in December it re-
mained unchanged.
On February 1, 2005, the Bank of Russia be-
gan to calculate the operational benchmark of
the exchange rate policy on the basis of the ruble
2005 Q4
value of the currency basket comprised of the
dollar and the euro. That decision was aimed at
lessening the intraday volatility of the ruble rate
against the dollar and the euro and reducing for-
eign exchange market players’ speculative activ-
ity. During 2005 the Bank of Russia changed sev-
eral times the structure of the bi-currency basket
(it did so on March 15, May 16, August 1 and De-
cember 2), gradually expanding the euro’s share
to match it with its weight in Russia’s foreign trade
turnover. By the end of 2005, the bi-currency bas-
ket was 40% euros and 60% dollars.
The real effective rate of the ruble
against foreign currencies rose 10.5% in 2005
year on year due to Russia’s large trade surplus.
The inflation rate also had a significant effect on
the dynamics of this indicator in 2005. The most
significant growth in the real effective rate of the
ruble was registered in the first half of the year: in
the first quarter the ruble appreciated 4.1% quar-
ter on quarter and in the second 3.7%. In the sec-
ond half of the year growth in the real effective
rate of the ruble slowed down: in the third quar-
ter it was 0.8% and in the fourth 1.5%.
Interest rates
There was no single interest rate trend on
the Russian financial market in the fourth quarter
of 2005. The increased expectations of the ruble’s
devaluation amid rebounding inflation after its
slowing in the third quarter caused interest rates
to rise. At the same time, the persistently high level
of banking sector ruble liquidity and the
favourable foreign trade situation kept up the
demand for ruble assets high and, consequently,
caused interest rates to fall. Interest rate dynam-
ics in various segments of the market depended
on what factors affected the market situation the
most.
The lower limit of the Bank of Russia in-
terest rate band was unchanged in the fourth
quarter at 0.5% p.a. on «tom-next» deposits,
while the upper one (overnight credit rate) fell
from 13% to 12% p.a. Average weighted interest
rates at four-week deposit auctions ranged from
1.91% to 1.98% p.a. (a little lower than the previ-
ous quarter’s level) and interest rates on three-
month deposits were in the range of 3.7% to 4.5%
p.a. The average interest rate on repo operations,
the principal market instrument used in providing
liquidity in the fourth quarter, remained virtually
unchanged at 6.26%.
Money market interest rates remained
within the Bank of Russia interest rate band in the
fourth quarter of 2005. The MIACR on overnight
ruble-denominated credit ranged between 0.75%
and 12.1% p.a. in October-December (in the third
quarter it varied between 0.9% and 7.1% p.a.)
Yields had a tendency to fall in all segments
of the ruble government bond market in the
fourth quarter of 2005. The OFZ market’s aver-
age quarterly effective market portfolio indicator
decreased from 7.7% to 7.1% p.a. At the end of
the quarter, the effective OFZ market portfolio
19 2005 Q4
Quantitative and Qualitative Monetary Indicators
indicator stood at 6.8% p.a., 0.4 percentage
points down on the end of the third quarter.
The average interest rate on loans ex-
tended to non-financial enterprises for all
terms in October inched up by 0.1 percentage
points from September to 10.8% p.a. It rose by
0.7 percentage points in November but fell by 0.3
percentage points in December. The fourth-quar-
ter average stood at 11.1% p.a., exceeding by half
a percentage point the third-quarter average. This
growth was due to a sharp rise (by 1.4 percentage
points) in interest rates on loans with terms up to
one month. Interest rates on longer-term loans
either remained unchanged or declined in the
fourth quarter.
Growth in the demand for credit in the
household sector along with the increased cost of
consumer credit services and not-so-fierce com-
petition allow banks to keep interest rates on
credit to the household sector higher than in-
terest rates on credit to the enterprise sector. The
average quarterly interest rate on credit to the
household sector for all terms in 2005 Q4 in-
creased by 0.3 percentage points quarter on quar-
ter, to 20.7% p.a. The most significant growth in
interest rates was registered in the shortest-term
sector, whereas longer-term rates grew more
slowly or decreased.
The average interest rate on household
time deposits in the fourth quarter gained 0.2
2005 Q4
percentage points quarter on quarter and stood
at 7.3% p.a. As in the third quarter, deposits with
terms from six months to one year had the high-
est interest rates. However, the average interest
rate on these deposits remained unchanged from
the third quarter at 10.1% p.a. Interest rates on
deposits with other terms fluctuated moderately.
The yield curve on bank lending opera-
tions in the fourth quarter, as before, had a nega-
tive inclination in the three- to six-month and
longer-term credit. At the same time, the curve
flattened in the shortest-term segment but rose
even more steeply in the longest-term segment,
probably reflecting the expectations of a fall in
medium-term interest rates.
The government bond yield curve re-
tained its rising shape in the fourth quarter. The
fall in yields during the quarter caused the curve
to move down. Its inclination continued to de-
crease as the yield on longer-term bonds declined
faster than the yield on shorter-term bonds. As
before, in the 11-year-plus segment the OFZ yield
curve deviated considerably from the flattened
yield curve due to the debt depreciation of these
bond issues (their yield depends on duration rather
than maturity).
The changes in the interest rate structure by
term of instrument, registered in the fourth quar-
ter, were caused by both inflation dynamics and
inflationary expectations. The accelerated growth
in the shortest-term interest rates was due to the
quarter-on-quarter acceleration of inflation in the
fourth quarter of 2005. The significant decrease
in interest rates on longer-term loans and depos-
its and the accelerated decline in the yield on long-
term ruble government bonds could reflect the
persistent long-term expectations of the slowing
of inflation.
Money
The annualised M2 growth rate slowed in
the fourth quarter and at the end of 2005 it
stood at 38.6%, 42% down on October 1, 2005.
In October-December 2005, M2 growth was big-
ger than in the previous quarter due to the recur-
rent seasonal factors and stood at 14.2%. This rep-
resents a decrease from the fourth quarter of
2004 and from the average fourth-quarter growth
21 2005 Q4
Quantitative and Qualitative Monetary Indicators
since 1999. Nevertheless, as a result of the accel-
eration of M2 growth in the second and third quar-
ters, full-year M2 growth in 2005 was bigger than
in 2004, when M2 expanded 35.8%, and ex-
ceeded M2 growth projections for 2005 (20-
32%).
Cash growth was slower than M2 growth
and the gap between M0 and M2 increases was
wider than in any other year since 2000. Slower
rates of M0 growth reflect favourable changes in
the M2 structure and the structure of M2 growth
from the viewpoint of its influence on inflation.
Allowing for the lags, the 2005 rates of
growth in the money supply will affect core infla-
tion in the first three quarters of 2006. If M2
growth continues to slow down on an annualised
basis, the monetary pressure on inflation may only
decrease by the end of the first half of the next
year.
The gap between M2 and GDP growth
rates
1, which narrowed considerably in 2004, con-
tinued to contract in the first half of 2005. How-
ever, in the third and fourth quarters of 2005 it
widened quarter on quarter, in the fourth quarter
less than in the third. The gap between the rates
of growth in GDP and the broader monetary ag-
gregate M2X, which comprises non-cash foreign
exchange kept by economic agents, remained al-
most unchanged in the fourth quarter. As a re-
sult, the gap between the rates of economic
growth (in terms of GDP) and the money supply
(in terms of both M2 and M2X) was wider at the
end of 2005 than at the end of 2004. The dynam-
ics of the velocity of money are important for the
assessment of the effect of this gap on inflation.
In 2005, the velocity of money in terms of the M2
aggregate decreased 6.1% against 10.2% in 2004.
In the fourth quarter of 2005 the velocity of
money declined more than 2% (it declined a little
less in the fourth quarter of 2004). As a result,
the trend towards the slowing of decline in the
velocity of money, registered since the second half
of 2004, continued by and large, but in the fourth
quarter it decreased somewhat faster than in the
first half of 2005 due to the structural changes in
the money supply and persistent demand for for-
eign exchange. A further slowing of the velocity
of money may even the inflationary potential of
the widening gap.
The aggregate
Money in the monetary
survey definition, which is similar to the M1 ag-
gregate and comprises the most liquid transac-
tional components of the money supply, reflects
the economic situation and liquidity preferences.
In 2005 it grew more than in 2004. Growth in cash
and demand accounts in the fourth quarter of
2005 was a little slower than in the same period
of 2004 but almost twice as fast as in the previ-
1 The gap characterises the part of monetary growth that exceeds the amount necessary to finance the increased volume of
transactions. The expansion of the gap may testify to the inflationary pressure by money supply growth on price dynamics.
2005 Q4
ous quarter. At the same time, unlike the situa-
tion in the third quarter, the aggregate’s dynam-
ics were mostly due to the acceleration of growth
in its cash component, which corresponds to the
recurrent seasonal dynamics of cash.
As usual, cash growth in the fourth quarter
of 2005 was the biggest of the year (15.4%) but
it was smaller than in the fourth quarter of 2004
(18.6%). There was a trend towards growth in the
M0 aggregate in the moving 12-month period
from February to October 2005, but in October-
December this aggregate contracted. Overall, cash
growth in 2005 was smaller than in 2004 (30.9%
against 33.8%) and it was mostly due to the con-
tinued increase in household income and year-on-
year increment in non-interest budget expendi-
tures relative to GDP (15.2% against 14.7%).
The household sector unabated demand for
foreign exchange contained cash growth. In the
fourth quarter and in 2005 as a whole household
sector demand for foreign exchange was higher
than in 2000-2004.
The non-cash component of the M1 ag-
gregate increased faster than cash in 2005 (by
41% against 27% in 2004). In the fourth quarter
of 2005 its annualised growth rates fell (from
45.2% as of October 1, 2005) but were higher than
in the same period of 2004. The non-financial
enterprise sector’s funds account for about 80%
of the non-cash component of M1 and its growth
23 2005 Q4
Quantitative and Qualitative Monetary Indicators
is indicative of economic agents’ increased de-
mand for money they need to conduct transac-
tions and service the payment turnover.
As a result of the acceleration of growth in
funds in transaction accounts, the annualised rate
of growth in the Money aggregate in the mon-
etary survey definition increased to 35.6% as of
January 1, 2006, and was higher than at the be-
ginning of the previous year (30.5%).
The rates of growth in Quasi-money , the
aggregate comprising the least liquid components
of the money supply used by economic agents as
savings, slowed in the fourth quarter from 39%
as of October 1, 2005, to 37.2% as of January 1,
2006. The October-December Quasi-money dy-
namics were the result of growth in the ruble
component of Quasi-money , that is, time de-
posits. In the fourth quarter, time deposits in-
creased 13.8%, but their annualised growth
slowed by 2 percentage points to 44.2%. In 2005
as a whole, growth in time deposits denominated
in the national currency was somewhat smaller
than in 2004 but far surpassed growth in foreign
currency-denominated deposits. Further growth
in ruble time deposits will be very important from
the viewpoint of mitigating the inflationary con-
sequences of money supply growth.
The rate of growth in foreign currency de-
posits, another component of Quasi-Money, was
slow (less than 1%) in the fourth quarter, but in
2005 as a whole it was considerably slower than
in 2004 (21.5% against 32.6%, respectively).
Instability of economic agents’ asset cur-
rency preferences and the corresponding fluctua-
tions in demand for the national and foreign cur-
rency, which caused rubles and foreign exchange
to flow back and forth, was one of the factors
that determined the dynamics of the monetary
aggregates in 2005. The fourth quarter saw the
slowing of the annual rates of growth in the ruble
aggregates and the M2X aggregate, whereas the
broad monetary aggregate M2Y, which comprises
foreign exchange, had a trend to grow. At the
same time, growth in the ruble aggregates M1 and
M2 slowed down more than the M2X aggregate,
which comprises non-financial agents’ non-cash
foreign currency assets (its annualised growth rate
slowed from 39.3% as of October 1, 2005, to
36.3% as of January 1, 2006). Annualised growth
in M2Y in October-December accelerated by one
percentage point and in 2005 as a whole this ag-
gregate continued to expand and, moreover, it did
so faster than other aggregates (31% as of Janu-
ary 1, 2006, against 25% as of January 1, 2005).
The ratio of dollarisation, that is, the share
of the foreign currency component in the money
supply in the monetary survey definition (M2X),
in the fourth quarter of 2005 declined from 18.1%
as of October 1, 2005, to 16.3% as of January 1,
2006 (in the same period of 2004 it fell by 2 per-
centage points to 17.6%). In 2005 as a whole, the
ratio of dollarisation decreased a little more than
in 2004. At the same time, the ruble component
of Quasi-money continued to predominate in
M2X, accounting for 30.2% as of January 1, 2006,
against 28.6% a year earlier.
The de-dollarisation process in the Russian
economy is also characterised by changes in the
M2Y structure. The share of the foreign currency
component of this broad monetary aggregate
contracted by 2 percentage points, mainly due to
the reduction of the share of foreign currency
deposits (in the fourth quarter of 2004 it con-
tracted by more than 4 percentage points). In
2005 as a whole, the share of all foreign currency
funds in the broad monetary aggregate M2Y con-
tracted by 4 percentage points to 25% (a more
significant contraction was registered in 2004).
The rates of growth in enterprise and house-
hold sector funds attracted by banks in rubles and
foreign currency (38.5% as of January 1, 2006)
were slower than the expansion of credit to the
2005 Q4
real sector (40.3% as of January 1, 2006, accord-
ing to preliminary data). At the same time, growth
in banking sector claims on the non-financial
sector (585,2 billion rubles) in the fourth quarter
of 2005 was faster than in the previous quarter
and the same quarter of 2004. However, the im-
portance of credit to the non-financial enterprise
and household sector as a source of growth in the
aggregate money supply decreased in the fourth
quarter and in 2005 as a whole.
Money supply growth in 2005 was effec-
tively contained by the massive accumulation of
funds in general government accounts, caused
by the expansion of the stabilisation fund, which
reached 1,237 billion rubles as of January 1, 2006.
The broad monetary base expanded 22.4%
in 2005 as a whole (it increased 24.3% in 2004).
The monetary base expanded 14.8% in the fourth
quarter of 2005 against 30.2%n in the same pe-
riod of 2004. The share of funds in credit institu-
tions’ correspondent accounts with the Bank of
Russia contracted from 20.2% to 17.5% in 2005,
whereas in 2004 it expanded by more than 4 per-
centage points. The share of credit institutions’
funds immobilised by the Bank of Russia by tak-
ing banks’ funds on deposit and conducting op-
erations with Bank of Russia bonds (OBR) con-
tracted from 4.2% to 1.4% of the monetary base
in 2005 and with credit institutions’ required re-
serves from 9.4% to 6.9%.
25 2005 Q4
Statistical Addendum
Statistical Addendum
Consumer prices by group of goods and services
(month on month, %)
Monthly inflation Core inflation Food price growth
Growth in food
prices net of
vegetable prices
Vegetable and
fruit price growth
Non-food price
growth
Service price
growth
January 2.4 1.2 2.5 1.3 13.1 1.1 4.4
February 1.6 0.9 1.2 0.8 4.1 0.9 4.2
March 1.1 0.7 1.0 0.6 3.9 0.8 1.7
April 1.0 0.6 1.0 0.5 4.2 0.6 1.8
May 0.8 0.6 0.7 0.4 2.5 0.6 1.5
June 0.8 0.6 0.8 0.6 2.3 0.5 1.2
July 0.7 0.7 0.4 0.7 -1.8 0.5 1.9
August -0.4 0.7 -1.4 0.8 -17.2 0.6 0.7
September 0.3 1.1 -0.2 1.1 -11.2 0.9 0.9
October 1.0 1.4 1.1 1.8 -5.6 1.0 0.8
November 1.0 1.1 1.2 1.3 1.0 0.8 0.4
December 1.1 1.0 1.5 1.2 4.1 0.6 0.9
Full year (December on
December)
12.0 11.2 10.2 11.8 -4.2 9.2 22.3
January 1.8 0.9 1.6 1.3 5.5 0.5 4.1
February 1.0 0.8 1.1 1.1 1.5 0.4 1.6
March 0.8 0.7 1.1 0.9 2.8 0.4 0.6
April 1.0 0.8 0.8 1.0 -0.6 0.6 2.0
May 0.7 0.6 0.4 0.5 -0.7 0.8 1.4
June 0.8 0.5 0.8 0.4 4.8 0.7 0.9
July 0.9 0.8 1.0 1.0 1.5 0.6 1.3
August 0.4 0.7 0.1 0.8 -6.3 0.5 1.0
September 0.4 0.9 0.0 0.9 -9.0 0.9 0.6
October 1.1 1.3 1.4 1.7 -2.7 0.7 1.2
November 1.1 1.1 1.5 1.5 2.2 0.7 0.8
December 1.1 1.0 1.7 1.4 5.4 0.4 1.0
Full year (December on
December)
11.7 10.5 12.3 13.1 3.3 7.4 17.7
January 2.6 0.9 1.4 1.1 5.1 0.4 8.8
February 1.2 0.7 1.4 0.9 6.1 0.4 2.2
March 1.3 0.8 2.1 1.1 11.2 0.4 1.2
April 1.1 0.9 1.7 1.3 5.4 0.5 0.8
May 0.8 0.6 1.1 0.7 4.1 0.4 0.8
June 0.6 0.5 0.7 0.4 3.3 0.3 0.9
July 0.5 0.5 0.3 0.5 -1.8 0.4 0.9
August -0.1 0.5 -1.0 0.5 -12.9 0.5 0.8
September 0.3 0.8 -0.7 0.6 -11.6 1.1 0.9
October 0.6 0.7 0.4 0.6 -2.4 0.7 0.7
November 0.7 0.6 0.9 0.6 4.5 0.6 0.6
December 0.8 0.6 1.1 0.6 5.6 0.5 0.8
Full year (December on
December) 10.9 8.3 9.6 9.1 14.3 6.4 21.0
2005 Q4
Consumer prices by group of goods and services
(since start of year on accrual basis, %)
Monthly inflation Core inflation Food price growth
Growth in food
prices net of
vegetable prices
Vegetable and
fruit price growth
Non-food price
growth
Service price
growth
January 2.4 1.2 2.5 1.3 13.1 1.1 4.4
February 4.1 2.1 3.7 2.2 17.8 2.0 8.8
March 5.2 2.8 4.8 2.8 22.4 2.8 10.6
April 6.2 3.4 5.8 3.3 27.6 3.5 12.6
May 7.1 4.0 6.5 3.8 30.8 4.1 14.2
June 7.9 4.7 7.4 4.4 33.7 4.6 15.6
July 8.7 5.4 7.8 5.1 31.4 5.1 17.8
August 8.3 6.2 6.3 6.0 8.7 5.7 18.7
September 8.6 7.3 6.1 7.1 -3.4 6.6 19.7
October 9.7 8.9 7.3 9.1 -8.9 7.7 20.7
November 10.8 10.1 8.6 10.4 -7.9 8.6 21.2
December 12.0 11.2 10.2 11.8 -4.2 9.2 22.3
January 1.8 0.9 1.6 1.3 5.5 0.5 4.1
February 2.8 1.7 2.8 2.3 7.1 0.9 5.8
March 3.5 2.4 3.8 3.2 10.1 1.4 6.4
April 4.6 3.2 4.7 4.2 9.5 2.0 8.5
May 5.3 3.8 5.2 4.8 8.7 2.8 10.0
June 6.1 4.3 6.0 5.2 13.9 3.4 11.0
July 7.1 5.1 7.1 6.2 15.6 4.0 12.5
August 7.6 5.8 7.2 7.1 8.3 4.6 13.6
September 8.0 6.8 7.2 8.0 -1.4 5.5 14.3
October 9.3 8.1 8.7 9.9 -4.0 6.3 15.7
November 10.5 9.3 10.4 11.5 -1.9 7.0 16.6
December 11.7 10.5 12.3 13.1 3.3 7.4 17.7
January 2.6 0.9 1.4 1.1 5.1 0.4 8.8
February 3.9 1.7 2.8 2.0 11.5 0.7 11.2
March 5.3 2.4 4.9 3.1 24.0 1.1 12.6
April 6.5 3.3 6.7 4.4 30.8 1.6 13.5
May 7.3 4.0 7.9 5.1 36.1 2.1 14.4
June 8.0 4.4 8.6 5.5 40.6 2.4 15.4
July 8.5 5.0 8.9 6.1 38.0 2.8 16.5
August 8.3 5.5 7.8 6.6 20.2 3.4 17.4
September 8.6 6.3 7.1 7.2 6.2 4.5 18.5
October 9.2 7.1 7.5 7.8 3.6 5.2 19.3
November 10.0 7.7 8.4 8.4 8.3 5.9 20.0
December 10.9 8.3 9.6 9.1 14.3 6.4 21.0
27 2005 Q4
Statistical Addendum
Consumer prices by group of goods and services
(month on month of previous year, %)
Inflation over
period Core inflation* Food price
growth*
Growth in food
prices net of
vegetable prices*
Vegetable and
fruit price growth
Non-food price
growth*
Service price
growth*
January 14.3 9.9 10.7 8.5 29.3 10.7 32.3
February 14.8 10.0 11.0 8.8 30.4 10.9 34.2
March 14.8 10.2 11.6 9.2 33.1 11.0 31.6
April 14.6 10.2 11.5 9.5 30.4 10.8 30.8
May 13.6 10.2 9.9 9.5 16.2 10.2 31.4
June 13.9 10.5 11.0 10.1 21.1 9.6 30.9
July 13.9 10.2 10.9 9.8 22.7 9.5 31.1
August 13.3 10.5 10.7 10.3 13.1 9.4 28.8
September 13.3 10.8 11.3 11.0 11.5 9.4 26.4
October 13.2 11.4 11.9 12.1 6.5 9.4 24.3
November 12.5 11.3 11.0 11.8 1.2 9.3 22.5
December 12.0 11.2 10.2 11.8 -4.2 9.2 22.3
January 11.3 11.0 9.2 11.7 -10.7 8.6 21.9
February 10.6 10.8 9.2 12.0 -12.9 8.0 18.9
March 10.3 10.8 9.2 12.2 -13.8 7.6 17.5
April 10.2 11.0 9.1 12.7 -17.8 7.6 17.8
May 10.2 11.0 8.9 12.9 -20.4 7.8 17.7
June 10.1 10.9 8.8 12.6 -18.4 7.9 17.4
July 10.4 11.0 9.5 12.9 -15.7 8.0 16.7
August 11.3 10.9 11.1 12.9 -4.6 8.0 17.0
September 11.4 10.7 11.3 12.7 -2.2 8.1 16.8
October 11.5 10.5 11.7 12.7 0.9 7.8 17.3
November 11.7 10.4 12.0 12.9 2.0 7.6 17.7
December 11.7 10.5 12.3 13.1 3.3 7.4 17.7
January 12.7 10.4 12.1 12.9 3.0 7.3 23.1
February 13.0 10.4 12.4 12.6 7.6 7.2 23.8
March 13.6 10.5 13.5 12.9 16.4 7.1 24.6
April 13.8 10.6 14.5 13.2 23.4 7.0 23.1
May 13.8 10.6 15.2 13.3 29.3 6.6 22.4
June 13.7 10.6 15.1 13.4 27.5 6.3 22.4
July 13.2 10.3 14.2 12.9 23.4 6.2 21.9
August 12.5 10.1 12.9 12.5 14.7 6.1 21.6
September 12.3 10.0 12.1 12.1 11.3 6.3 22.0
October 11.7 9.4 11.0 10.9 11.6 6.3 21.4
November 11.3 8.9 10.3 9.9 14.1 6.3 21.2
December 10.9 8.3 9.6 9.1 14.3 6.4 21.0
* Bank of Russia estimate.
2005 Q4
Inflation growth structure (percentage points)
Inflation growth over period since start of year due to price changes
by group of goods and services
Foodstuffs* Non-food
products Paid services Vegetables and
fruit
Inflation over
period, % Core inflation Non-core
inflation**
January 0.7 0.3 0.8 0.7 2.4 1.0 1.4
February 1.1 0.5 1.5 0.9 4.1 1.7 2.4
March 1.4 0.8 1.8 1.2 5.2 2.3 2.9
April 1.7 1.0 2.2 1.4 6.2 2.8 3.4
May 1.9 1.1 2.4 1.6 7.1 3.3 3.8
June 2.2 1.3 2.7 1.8 7.9 3.8 4.1
July 2.6 1.4 3.1 1.6 8.7 4.4 4.3
August 3.0 1.6 3.2 0.5 8.3 5.0 3.2
September 3.6 1.8 3.4 -0.2 8.6 6.0 2.7
October 4.5 2.1 3.5 -0.5 9.7 7.2 2.5
November 5.2 2.4 3.6 -0.4 10.8 8.2 2.6
December 5.9 2.5 3.8 -0.2 12.0 9.1 2.9
January 0.6 0.2 0.8 0.2 1.8 0.8 1.0
February 1.1 0.3 1.1 0.3 2.8 1.4 1.4
March 1.5 0.4 1.2 0.4 3.5 2.0 1.6
April 2.0 0.6 1.5 0.4 4.6 2.6 1.9
May 2.2 0.8 1.8 0.4 5.3 3.1 2.2
June 2.4 1.0 2.0 0.6 6.1 3.5 2.6
July 2.9 1.2 2.3 0.7 7.1 4.2 2.9
August 3.3 1.4 2.5 0.4 7.6 4.7 2.8
September 3.8 1.7 2.6 -0.1 8.0 5.5 2.5
October 4.6 1.9 2.9 -0.2 9.3 6.6 2.7
November 5.4 2.1 3.0 -0.1 10.5 7.6 2.9
December 6.1 2.3 3.2 0.1 11.7 8.5 3.3
January 0.4 0.1 1.8 0.2 2.6 0.7 1.9
February 0.8 0.2 2.3 0.5 3.9 1.3 2.6
March 1.3 0.4 2.6 1.0 5.3 1.9 3.3
April 1.9 0.5 2.8 1.3 6.5 2.7 3.8
May 2.1 0.7 3.0 1.5 7.3 3.1 4.1
June 2.3 0.8 3.2 1.7 8.0 3.5 4.5
July 2.5 0.9 3.4 1.6 8.5 3.9 4.5
August 2.8 1.1 3.6 0.8 8.3 4.4 4.0
September 3.0 1.5 3.9 0.3 8.6 5.0 3.6
October 3.3 1.7 4.0 0.1 9.2 5.6 3.6
November 3.6 1.9 4.2 0.3 10.0 6.1 3.9
December 3.8 2.1 4.4 0.6 10.9 6.6 4.3
* Excluding vegetables and fruit.
** Growth in prices of goods and paid services not included in calculation of base consumer price index.
29 2005 Q4
Statistical Addendum
Monthly inflation growth due to price changes by group
of goods and services
Foodstuffs* Non-food
products Paid services Vegetables and
fruit
Inflation over
period, % Core inflation Non-core
inflation**
January 0.7 0.3 0.8 0.7 2.4 1.0 1.4
February 0.4 0.2 0.7 0.2 1.6 0.7 0.9
March 0.3 0.2 0.3 0.2 1.1 0.6 0.5
April 0.3 0.2 0.3 0.3 1.0 0.5 0.5
May 0.2 0.2 0.3 0.2 0.8 0.4 0.4
June 0.3 0.1 0.2 0.1 0.8 0.5 0.3
July 0.3 0.1 0.4 -0.1 0.7 0.5 0.2
August 0.4 0.1 0.1 -1.1 -0.4 0.6 -1.0
September 0.5 0.2 0.2 -0.6 0.3 0.9 -0.6
October 0.9 0.3 0.1 -0.3 1.0 1.2 -0.1
November 0.6 0.2 0.1 0.0 1.0 0.9 0.1
December 0.6 0.2 0.2 0.2 1.1 0.8 0.3
January 0.6 0.2 0.8 0.2 1.8 0.8 1.0
February 0.5 0.1 0.3 0.1 1.0 0.6 0.4
March 0.4 0.1 0.1 0.1 0.8 0.6 0.2
April 0.4 0.2 0.4 0.0 1.0 0.6 0.3
May 0.2 0.2 0.3 0.0 0.7 0.5 0.2
June 0.2 0.2 0.2 0.2 0.8 0.4 0.4
July 0.4 0.2 0.3 0.1 0.9 0.6 0.3
August 0.4 0.2 0.2 -0.3 0.4 0.5 -0.1
September 0.4 0.3 0.1 -0.4 0.4 0.7 -0.3
October 0.8 0.2 0.2 -0.1 1.1 1.0 0.2
November 0.7 0.2 0.2 0.1 1.1 0.9 0.2
December 0.6 0.1 0.2 0.2 1.1 0.8 0.3
January 0.4 0.1 1.8 0.2 2.6 0.7 1.9
February 0.4 0.1 0.5 0.3 1.2 0.6 0.7
March 0.5 0.1 0.3 0.5 1.3 0.6 0.7
April 0.5 0.2 0.2 0.3 1.1 0.7 0.4
May 0.3 0.1 0.2 0.2 0.8 0.5 0.3
June 0.2 0.1 0.2 0.2 0.6 0.4 0.3
July 0.2 0.1 0.2 -0.1 0.5 0.4 0.1
August 0.2 0.2 0.2 -0.6 -0.1 0.4 -0.5
September 0.2 0.4 0.2 -0.6 0.3 0.6 -0.4
October 0.3 0.2 0.2 -0.1 0.6 0.5 0.0
November 0.2 0.2 0.1 0.2 0.7 0.5 0.3
December 0.3 0.2 0.2 0.2 0.8 0.4 0.4
* Excluding vegetables and fruit.
** Growth in prices of goods and paid services not included in calculation of base consumer price index.
2005 Q4
Contribution to Inflation Growth (%)
Contribution to inflation growth over period since start
of year by group of goods and services
Foodstuffs* Non-food products Paid services Vegetables and fruit Core inflation Non-core inflation**
January 27.5 12.4 31.6 28.5 40.6 59.4
February 26.7 13.4 37.1 22.8 41.8 58.2
March 27.3 14.9 35.3 22.5 44.2 55.8
April 27.0 15.3 34.7 23.1 44.9 55.1
May 26.9 15.9 34.5 22.7 46.1 53.9
June 28.1 16.0 33.7 22.2 47.9 52.1
July 29.7 16.2 35.2 18.8 50.2 49.8
August 36.5 19.1 38.9 5.5 60.7 39.3
September 41.6 21.2 39.3 -2.1 69.1 30.9
October 46.7 21.6 36.4 -4.7 74.3 25.7
November 48.5 21.7 33.6 -3.8 76.3 23.7
December 49.1 21.0 31.7 -1.8 75.9 24.1
January 33.8 8.6 43.5 14.0 43.2 56.8
February 40.0 10.2 38.3 11.5 50.0 50.0
March 42.9 11.7 32.8 12.7 55.3 44.7
April 43.5 13.3 34.0 9.2 57.5 42.5
May 42.4 15.9 34.4 7.3 58.5 41.5
June 39.8 17.2 32.9 10.1 57.2 42.8
July 40.9 17.3 32.1 9.8 58.8 41.2
August 43.8 18.4 32.8 4.9 62.6 37.4
September 47.0 21.1 32.7 -0.8 68.4 31.6
October 50.2 20.8 31.0 -1.9 70.9 29.1
November 51.5 20.4 28.9 -0.8 72.0 28.0
December 52.1 19.2 27.5 1.2 72.0 28.0
January 17.0 4.8 70.2 8.0 27.1 72.9
February 21.2 6.2 60.4 12.1 33.4 66.6
March 24.5 6.8 50.0 18.7 36.7 63.3
April 28.6 8.1 43.8 19.5 41.1 58.9
May 29.3 9.2 41.2 20.2 43.1 56.9
June 29.0 9.8 40.5 20.8 44.1 55.9
July 30.1 10.9 40.7 18.3 46.5 53.5
August 33.2 13.2 43.6 9.9 52.3 47.7
September 35.1 17.1 44.9 3.0 58.3 41.7
October 35.9 18.6 43.9 1.6 60.9 39.1
November 35.6 19.2 41.8 3.4 61.1 38.9
December 35.2 19.2 40.2 5.4 60.5 39.5
* Excluding vegetables and fruit.
** Growth in prices of goods and paid services not included in calculation of base consumer price index.
31 2005 Q4
Statistical Addendum
Contribution to monthly inflation growth by group
of goods and services
Foodstuffs* Non-food products Paid services Vegetables and fruit Core inflation Non-core inflation**
January 27.5 12.4 31.6 28.5 40.6 59.4
February 25.5 15.0 45.0 14.6 43.7 56.3
March 29.7 20.3 28.3 21.7 53.0 47.0
April 25.5 17.2 31.6 25.7 48.7 51.3
May 25.9 21.2 33.1 19.8 55.3 44.7
June 38.4 16.6 26.9 18.1 62.7 37.3
July 46.8 18.9 50.7 -16.4 74.7 25.3
August estimate can't be made for negative value
September 164.8 72.9 50.5 -188.3 270.6 -170.6
October 86.6 25.6 14.2 -26.4 114.6 -14.6
November 63.8 23.3 8.4 4.5 94.1 5.9
December 53.8 14.2 15.1 16.9 71.7 28.3
January 33.8 8.6 43.5 14.0 43.2 56.8
February 50.7 13.1 29.1 7.1 61.8 38.2
March 52.8 17.0 13.3 16.9 74.2 25.8
April 45.7 19.0 38.2 -2.9 65.1 34.9
May 35.7 32.6 36.6 -4.9 64.9 35.1
June 22.1 25.8 23.1 29.1 48.2 51.8
July 47.5 17.6 27.3 7.5 68.1 31.9
August 89.6 37.7 44.9 -72.2 122.3 -22.3
September 100.3 67.0 30.2 -97.5 164.9 -64.9
October 70.5 18.9 20.3 -9.7 86.8 13.2
November 60.7 18.0 13.8 7.5 79.4 20.6
December 55.8 9.0 15.5 19.7 71.7 28.3
January 17.0 4.8 70.2 8.0 27.1 72.9
February 30.0 9.2 40.0 20.8 46.5 53.5
March 33.6 8.4 20.9 37.0 46.1 53.9
April 46.7 14.1 15.8 23.4 60.9 39.1
May 34.9 18.4 20.6 26.1 60.1 39.9
June 25.7 15.5 32.1 26.6 54.6 45.4
July 48.4 29.6 43.6 -21.6 86.0 14.0
August estimate can't be made for negative value
September 92.7 141.5 83.9 -218.1 243.9 -143.9
October 47.2 40.9 29.7 -17.8 96.4 3.6
November 31.6 26.1 18.2 24.1 63.1 36.9
December 31.1 18.5 22.2 28.2 53.5 46.5
* Excluding vegetables and fruit.
** Growth in prices of goods and paid services not included in calculation of base consumer price index.
2005 Q4
Major monetary indicators in 2005
1.01.05 1.02.05 1.03.05 1.04.05 1.05.05 1.06.05 1.07.05 1.08.05 1.09.05 1.10.05 1.11.05 1.12.05 1.01.06
Cash (M0), billion rubles 1,534.8 1,425.2 1,444.1 1,481.7 1,565.8 1,582.3 1,650.7 1,701.8 1,703.3 1,740.7 1,752.0 1,765.8 2,009.2
monthly rates of growth, % 15.2 -7.1 1.3 2.6 5.7 1.1 4.3 3.1 0.1 2.2 0.6 0.8 13.8
rates of growth since start of year, % -7.1 -5.9 -3.5 2.0 3.1 7.6 10.9 11.0 13.4 14.2 15.1 30.9
share in M2 structure, % 35.2 34.0 33.5 33.1 34.1 33.7 33.5 34.1 33.2 32.9 33.0 32.5 33.2
Non-cash funds (M2-M0), billion rubles 2,828.5 2,765.1 2,867.3 2,992.9 3,021.0 3,106.4 3,276.7 3,283.9 3,432.7 3,552.1 3,561.9 3,670.4 4,036.3
monthly rates of growth, % 8.5 -2.2 3.7 4.4 0.9 2.8 5.5 0.2 4.5 3.5 0.3 3.0 10.0
rates of growth since start of year, % -2.2 1.4 5.8 6.8 9.8 15.8 16.1 21.4 25.6 25.9 29.8 42.7
M2 monetary aggregate, billion rubles 4,363.3 4,190.3 4,311.4 4,474.6 4,586.8 4,688.6 4,927.4 4,985.8 5,136.0 5,292.8 5,314.0 5,436.1 6,045.6
monthly rates of growth, % 10.7 -4.0 2.9 3.8 2.5 2.2 5.1 1.2 3.0 3.1 0.4 2.3 11.2
rates of growth since start of year, % -4.0 -1.2 2.6 5.1 7.5 12.9 14.3 17.7 21.3 21.8 24.6 38.6
rates of growth (month on month of previous year, %) 35.8 30.4 29.3 30.8 31.7 33.0 33.6 37.2 40.4 42.0 39.9 38.0 38.6
Foreign currency deposits, billion rubles 935.1 993.6 1,033.2 1,024.9 1,007.7 1,054.9 1,090.6 1,101.5 1,154.4 1,167.9 1,171.4 1,171.7 1,178.2
monthly rates of growth, % 0.9 6.3 4.0 -0.8 -1.7 4.7 3.4 1.0 4.8 1.2 0.3 0.0 0.6
rates of growth since start of year, % 6.3 10.5 9.6 7.8 12.8 16.6 17.8 23.5 24.9 25.3 25.3 26.0
share in money supply structure by monetary survey
methodology, % 17.6 19.2 19.3 18.6 18.0 18.4 18.1 18.1 18.4 18.1 18.1 17.7 16.3
Money supply by monetary survey methodology,
billion rubles
5,298.7 5,184.8 5,344.4 5,499.6 5,594.0 5,743.0 6,015.9 6,087.4 6,286.5 6,458.4 6,482.7 6,604.8 7,221.1
monthly rates of growth, % 8.9 -2.2 3.1 2.9 1.7 2.7 4.8 1.2 3.3 2.7 0.4 1.9 9.3
rates of growth since start of year, % -2.2 0.9 3.8 5.6 8.4 13.5 14.9 18.6 21.9 22.3 24.6 36.3
M2 velocity (annualised average) 4.6 4.6 4.6 4.6 4.6 4.5 4.5 4.5 4.5 4.5 4.4 4.4 4.4
change since start of year, % -6.1
Monetisation (by M2 aggregate), % 21.6 21.9 22.2 22.4 22.6
Broad monetary base 2,380.3 2,144.1 2,259.9 2,250.1 2,237.5 2,263.1 2,302.8 2,341.9 2,417.4 2,538.9 2,483.3 2,527.8 2,914.1
monthly rates of growth, % 14.3 -9.9 5.4 -0.4 -0.6 1.1 1.8 1.7 3.2 5.0 -2.2 1.8 15.3
rates of growth on accrual basis, % -9.9 -5.1 -5.5 -6.0 -4.9 -3.3 -1.6 1.6 6.7 4.3 6.2 22.4
Multiplier (by broad monetary base) 1.83 1.95 1.91 1.99 2.05 2.07 2.14 2.13 2.12 2.08 2.14 2.15 2.07
change since start of year, % 9.0 6.6 4.1 8.5 11.8 13.0 16.7 16.1 15.9 13.7 16.7 17.3 13.2
33 2005 Q4
Statistical Addendum
2005 Q4
35 2005 Q4
Statistical Addendum
2005 Q4
37 2005 Q4
Statistical Addendum
2005 Q4
© The Central Bank of the Russian Federation, 2006
Research and Information Department