With taxes and excises being raised, various products may become more expensive, according to a Central Bank report on the monetary policy that was published on the bank’s website.
The largest price increase should be expected for fuel and tobacco products (around 5%). Alcohol prices will grow by 1% while car prices will go up by 0.2%. Inflation will grow mainly due to the increasing fuel excise and new VAT rate of 20% starting January 1, 2019. By spring, the annual inflation will approach 6%; however, later it will stabilize back to the target rate of 4%. The Central Bank expects that the higher excises will contribute 0.3% to 0.4% to the inflation growth.
According to Central Bank Governor Elvira Nabiullina, the key rate was increased to 7.75% exactly to restrict the scale of inflation risks in the coming year. At the same time, the bank warns that the inflation expectations are not set in stone.
“This means there is a high risk of inflation growing in response to the VAT-related price increases. Therefore, we can’t consider the VAT increase as an exclusively one-off factor,” the report states.