Russians’ inflation expectations dropped to 11.2% in September

Inflation expectations of the Russian population decreased in October after growing over the previous three months. Their median estimate for the year ahead was 11.2%, follows from the results of a survey by inFOM LLC, reported on the Central Bank website.

The study was conducted on October 2-12 in 105 settlements of the Russian Federation, a total of 2,018 people were surveyed. In June, the rate was 10.2%, after which it rose to 11.1% in July, 11.5% in August and 11.7% in September.

At the same time, observed inflation has increased for the third month in a row. The figure increased in September from 13.8% to 13.9%.

In September, the Bank of Russia predicted that annual inflation would continue to rise in the coming months due to increasing price pressure. In 2023, annual inflation will be 6-7%. It will return to 4% in 2024 and will remain at this level in the future. The Central Bank also clarified that to limit the deviation of inflation from the target and return it to 4% in 2024, an increase in the key rate was required.

On September 15, the Central Bank raised the key rate by 1 percentage point to 13%. This is the third consecutive rate increase in a month and a half: first, the Central Bank raised the rate at a meeting on July 21 by 1 percentage point to 8.5%, and then unscheduledly increased the rate on August 15 immediately to 12%. At a press conference, Central Bank Chairman Elvira Nabiullina noted that the sharp movement of the exchange rate in itself was not a risk to financial stability, but it caused an additional increase in inflation and inflation expectations.

In September, consumer prices rose 6% year on year after 5.15% in August. In monthly terms, inflation also accelerated, amounting to 0.87% compared to 0.28% a month earlier. Compared to December 2022, the increase was 4.6%. On October 10, Deputy Chairman of the Central Bank Alexei Zabotkin said that in order to return inflation to the target of 4% in 2024, the regulator does not rule out tightening monetary policy next year, he emphasized. Annual inflation in Russia will reach its peak in the spring and summer of next year, Zabotkin added.