Inflation in Russia in Early 2026: What Lies Behind the Slowdown in Headline CPI

On Inflation

In early 2026, inflation in Russia began to decelerate. However, the decline in the headline consumer price index does not yet indicate weakening persistent inflationary pressure. We're talking about the portion of price growth that is unrelated to seasonality, one-off fluctuations, and short-term shocks. This is precisely what matters most for monetary policy. Therefore, to assess medium-term risks, it's necessary to separate temporary price changes from their persistent component. This is exactly what trend inflation estimates help accomplish.

In international practice, inflation analysis isn't limited to comparing headline and core indices. Researchers and central banks increasingly use persistent inflation measures that isolate the long-term component of price growth and separate it from temporary noise, shocks, and relative price shifts. One of the best-known examples is the multivariate core trend (MCT) inflation estimate developed by the Federal Reserve Bank of New York. This indicator accounts for not only inflation persistence over time but also the breadth of its distribution across sectors. In other words, MCT distinguishes isolated price spikes from broad systemic inflationary pressure.

For Russia, the idea of isolating the persistent component of inflation is not new. The Bank of Russia publishes trend inflation estimates. However, such estimates don't answer questions about the internal structure of persistent price pressure. In the present work, the multivariate MCT model is applied to Russian disaggregated data for the first time. This allows us to assess not only the level of trend inflation but also to decompose it into common and sectoral components.

From October 2025 to March 2026, observed annual inflation fell from 7.73% to 5.87%, while core inflation dropped from 6.92% to 5.01%. Meanwhile, the median MCT estimate showed no comparable decline. On the contrary, it rose from 6.42% in October to 7.66% in January, then only partially corrected—to 7.60% in February and 7.38% in March. This means that against the backdrop of slowing headline CPI, persistent inflationary pressure remained elevated. Moreover, trend inflation during this period was substantially higher than both observed and core inflation.

This result prevents us from interpreting the slowdown in aggregate inflation indices as a sign of sustained disinflation. In March 2026, a significant gap persisted between current inflation and its trend estimate. Actual inflation stood at 5.86-5.87%, while MCT remained near 7.4%. This gap indicates that much of the recent slowdown was explained by temporary and volatile factors rather than a sustained reduction in medium-term inflationary pressure.

Some Statistics

Importantly, this conclusion aligns with official estimates from the Bank of Russia. In March 2026, annual inflation declined to 5.86%, whereas the Bank of Russia's five-year trend inflation estimate stood at 7.84%, and the three-year estimate at 7.49%. In other words, the divergence between current inflation and its persistent component is captured not only in the model presented here but also in official analytics. This means the decline in current inflation has not yet been accompanied by a comparable weakening of persistent price pressure.

Decomposing MCT into common and sectoral components shows that the rise in trend inflation was driven primarily by the common component, while the role of the sectoral part remained limited. This means persistent price pressure affected not individual sectors but the economy as a whole.

The global literature shows that trend inflation matters because it's linked to long-term welfare losses. In Ascari and Sbordone's work, The Macroeconomics of Trend Inflation (2014), they demonstrate that positive trend inflation amplifies relative price dispersion, makes the economy more volatile and less stable, and complicates the stabilization of inflation and expectations. In this sense, trend inflation serves not simply as a smoothed estimate of current inflation but as a characteristic of the macroeconomic environment that determines the costs of monetary policy and the efficiency of resource allocation.

This conclusion received quantitative development in the article by Ascari, Phaneuf, and Sims, On the Welfare and Cyclical Implications of Moderate Trend Inflation (2018). The authors show that in an extended DSGE model, raising trend inflation from 2% to 4% is associated with welfare losses equivalent to roughly 4% of consumption. These losses stem from increased price and wage dispersion, rising markups, and higher macroeconomic stabilization costs. More recent work by Ascari and Fosso, The International Dimension of Trend Inflation (2024), shows that trend inflation can also be influenced by slowly changing external costs. Thus, questions about the nature of trend inflation and the mechanisms through which it affects welfare remain open.

Conclusions

The results obtained show that in early 2026, Russia maintained high trend inflation despite the decline in headline and core inflation. Its source was primarily broad price pressure rather than a set of scattered sectoral shocks. Comparison with Bank of Russia estimates, in turn, shows that this is not a peculiarity of the model used but rather a robust substantive signal, as trend inflation remained noticeably above target.

Thus, the observed inflation slowdown does not yet allow us to speak of a sustained return to target. The decline in current inflation has not been accompanied by a comparable decline in its persistent component. Therefore, it's premature to talk about a rapid return of inflation to the target level and, even more so, about the possibility of rapid monetary policy easing.