Sanctions and oil price fluctuations have led to the growth of inflation in Russia, Pavel Trunin, Director of the Center for Macro-Economics and Finance at the Gaidar Institute for Economic Policy, said on Monday.
“The decline in the ruble cannot but affect the inflation rate. At the end of October, it stood at 3.5%, but at the end of the year, it will increase. The inflation will continue to accelerate in 2019. Russia’s Central Bank expects the annual growth at 5-5.5%. Our institute’s estimations are close to these figures”, the expert noted.
The inflation growth will be affected by increasing value-added tax, Trunin added.
“Besides there is a great uncertainty as regards the foreign policy situation. Everyone is expecting a new package of sanctions, which is another negative factor that can provoke a surge of inflation”, he said.
Another unfavorable factor is the weakening of the ruble.
“The ruble was falling even when oil prices were high. Now, the price has decreased to $60 per barrel. So far, this is not critical for the Russian economy. However, no one can forecast oil prices. It may happen that the price will drop to $40 per barrel. This mean a greater pressure on the ruble”, the expert emphasized.
He added that all these factors are an evidence of great risks for the inflation acceleration.
“It is conceivable that the Central Bank will raise a key interest rate this year, and possibly, next year as well”, Trunin concluded.