Bank of Russia promises to dampen inflation to 7.5%

The Bank of Russia expects average annual inflation at 7.5% in 2023, which is the upper limit of the target rage, Alexander Morozov, Director of Research and Forecasting at the Bank of Russia, said on the sidelines of the conference, Investment 2024: Ideas and Strategies in a Changing World.

According to the official, current inflation is close to the upper limit of the forecasted range of 7-7.5%. He stressed that the seasonally adjusted rate of price growth is not accelerating anymore.

“If we add the base effect to the equation, prices actually accelerated above the 4% target as early as in late November and December 2022; with this in mind, we should not expect a significant increase from what you mentioned – 7.4%. We are focusing on the upper limit of our target range at the moment,” Alexander Morozov added.

“It’s good if that’s the case. But so far, the risk that inflation will exceed 7.5% looks considerable,” economist Sergei Khestanov, Associate Professor at RANEPA, said.

Inflation expectations in Russia have increased according to the regulator’s November forecast. The Central Bank intends to slow inflation down to 4%, when Russians expect it to accelerate to 12%. On October 27, 2023, the Bank of Russia Board of Directors decided to increase the key rate by 200 basis points to 15.00% per annum. Governor Elvira Nabiullina said the rate was hiked in response to the inflationary pressure that grew in the middle of the year.

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