The Central Bank assessed the possibility of lowering the inflation target – Kommersant

Central Bank published review on monetary policy. The document says that Western sanctions, economic restructuring and other factors are making “significant adjustments to the assessment of the possibility of lowering the inflation target” (since 2016, the inflation target is 4%).

The Bank of Russia clarified that in 2021, the possibility of lowering the inflation target to 3% was discussed due to favorable economic forecasts. However, after the events of 2022, which led to price volatility, inflation in trading partner countries and other factors, the regulator considers it necessary to conduct an “additional analysis” of the issue of lowering the target level.

The Central Bank document says that against the backdrop of a number of factors, including Western sanctions, supply shocks in the Russian economy could occur much more often. Among other factors, the regulator pointed out the trends in the world economy: deglobalization, demographic changes.

The Bank of Russia also believes that climate change and decarbonization measures will cause supply and demand shocks to occur simultaneously. The regulator notes that in this regard it will be more difficult to predict inflation.

In the baseline scenario of the Central Bank, inflation will be 4.5–6.5% in 2023, and 4% in 2024. In the second quarter of 2023, the regulator expects inflation at 3.6% after 3.5% in the first quarter. CB predicted rising inflation since May. The key rate remains at 7.5%.

Lusine Balasyan