Rescheduling an increase in utility rates from July to October has had a major impact on inflation in Russia, Central Bank officials have acknowledged. After emphasising the importance of households’ inflation expectations, the Central Bank is now talking about inflation being fuelled by non-monetary factors, including higher monopoly prices and petrol shortages. Currently, 28% of Russians say their financial situation has worsened. Yet household losses are most likely to increase in October, partly because of another round of price increases flagged by the Central Bank of Russia.
The Central Bank traditionally justifies the ongoing rigorous monetary policy by citing surveys of inflation expectations among households and businesses. Its argument is that, with unemployment low and prices expected to rise, the Central Bank needs to keep borrowing costs exceptionally high. The slight quarter-percentage-point cut in the key rate reflects this logic well. However, in its latest report on price growth in the country, the Central Bank cited entirely different contributors to inflation, unrelated either to unemployment indicators or to ordinary citizens’ expectations of future price increases
Annual inflation edged down to 5.98% in July 2026 from 6.02% in June, according to Central Bank officials’ calculations. They said the annual rate of consumer price growth was significantly affected by the decision to postpone the indexation of utility rates in 2026 from July to October. In 2025, the rates had been indexed in July, ‘meaning the effect of last year’s indexation dropped out of the calculation’. According to the Central Bank, this reduced annual inflation by 0.77 percentage points compared with June. It forecasts that ‘utility rate indexation will remarkably contribute to the acceleration of annual inflation in October’.
For now, however, the favourable effect of leaving the rates unchanged in July has been entirely ‘eaten up’ by higher petrol and diesel prices across the country. The technical decline in inflation caused by the deferred rate increase was almost fully offset by faster annual price growth for other goods and services, particularly petroleum products, vegetables and fruit, as well as meat products, the Central Bank noted in its latest report
Thus, recent circumstances show that price dynamics in the Russian economy are in no way linked with inflation expectations, claims about low official unemployment or tight restrictions on lending to businesses
Despite the decision to reschedule the rate increase until ‘after the single voting day’, Russians are reporting a remarkable deterioration in their financial situation
- Price Growth vs. Previous Month, SAAR
- Trend Inflation, YoY
- Inflation, YoY
- Average Monthly Price Growth over Three Months, SAAR
- Core Inflation, YoY
- Core CPI Growth vs. Previous Month, SAAR
Inflation indicators and components in Russia, according to Rosstat and the Central Bank. SAAR stands for seasonally adjusted annual rate. Source: Central Bank of Russia.
Only 8% of respondents said their financial situation had improved over the previous two to three months, according to Public Opinion Foundation (FOM). Surveys conducted in early August 2026 found that 28% of Russians said their financial situation had worsened over the previous two to three months.
In August 2026, for the first time since the start of the special military operation, the share of Russians who described their financial situation as poor rose to 22%.
The deterioration was particularly pronounced in the Southern Federal District, where 35% of people now report financial losses. In the Siberian Federal District, 33% say their financial situation has declined.
Very few respondents reported any improvement. The proportion was 6% in the Urals, 5% in Siberia and 7% in both central and southern Russia, FOM said. The same organisation conducts surveys of inflation expectations commissioned by the Central Bank
According to a July 2026 survey by inFOM LLC, households expected inflation a year ahead to reach 14.7%, up from 12.4% in June, the Central Bank summarised the survey results. These are the mass-polling figures Central Bank officials will cite when announcing their next decision on the key rate.
The Central Bank leadership’s remarkable confidence in commissioned surveys looks even more unusual given the public’s limited awareness of the Central Bank itself and the key rate it sets. Only 48% of Russians know or have heard something about the Central Bank’s key rate, FOM found. Just one in seven Russians, or 14%, was able to give its correct current level
Despite low public awareness of the Central Bank’s policy instruments, even before the scheduled rate increases, about 30% of Russians were reporting deterioration in their financial position. Once the rates rise in October 2026, the number of people to experience an adverse impact is unlikely to fall
Under Russian government plans, households’ total utility bills will rise by 9.9% from October 1. Electricity prices for households will increase by a further 11.3% from October 2026. In addition, household rates introduced by electricity grid companies will climb 15.2%. Wholesale natural gas prices for households will go up by 9.6% from October.
Subsequent years will see further sizeable increases in the utility rates by the government. Prices and tariffs for households will rise faster than for other consumers. In the electricity grid sector, for example, prices for grid services supplied to households will rise by 15.3% in 2027 versus 13% for other consumers. In 2028, grid household rates are planned to increase by another 11.2% versus 8.9% for other consumers.
The government has therefore already set out a path of price increases for the coming years. Those increases have nothing to do with surveys of inflation expectations or the cost of credit, yet they do relate to shifts in the Central Bank’s key rate.
ORIGINAL: NG/Russian Central Bank Warns Utility Rate Rises Will Push Inflation Higher
