Central Bank: annual inflation will temporarily fall below 4%
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In the coming months, annual inflation in Russia will fall below 4% due to the effect of a high base in 2022, says the medium-term forecast Central Bank.
“According to the forecast of the Bank of Russia, in the coming months, annual inflation will temporarily drop below 4% due to the high base effect of last year. At the same time, sustainable inflationary pressures will gradually increase from moderately low levels,” the forecast says.
In accordance with the baseline scenario of the Central Bank, by the end of 2023, annual inflation will be 5.0-7.0%, after which in 2024 it will return to the target of 4%.
At the end of 2022, inflation in Russia amounted to 11.94% after 8.39% in 2021. This year, the Ministry of Economic Development expects inflation at 5.5%. According to the Ministry of Economy, annual inflation accelerated in the week from January 31 to February 6 to 11.72% after 11.5% a week earlier. Weekly inflation over the same period, according to Rosstat, accelerated from 0.21% to 0.26%.
Earlier today, the Central Bank Board of Directors of the Bank of Russia is expected to left key rate at 7.5% per annum. It has been at this value since September last year. In its release, the Bank of Russia drew attention to the fact that inflation expectations of the population and business have decreased, but remain at an elevated level, and the dynamics of economic activity is better than the October forecast of the Central Bank. Although the population is still cautious in consumer behavior, there are signs of a recovery in consumer activity.
The Central Bank raised the forecast for the key rate for 2023 from 6.5-8.5% to 7-9%. For 2024, the forecast has also been revised by 6.5-7.5% (previously 6-7%). Taking into account the ongoing restructuring of the Russian economy in the baseline scenario, the Bank of Russia forecasts that the GDP growth rate will be (-1.0)–(1)% in 2023 and 0.5–2.5% in 2024. In 2025 .GDP will grow by 1.5-2.5%. In addition, the Central Bank lowered its forecast for the price of Urals oil for 2023 from $70 to $55/bbl.
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