The rise in prices in 2024 is a consequence of overheating demand, the head of the Bank of Russia Elvira Nabiullina said. According to her, the price increase should not be explained by structural changes in the Russian economy.
“Over the past three years, the price level has increased by 30%. At the same time, the rise in prices over the past year can no longer be explained by structural changes in the economy. It is a consequence of the increased overheating of demand, the growth of which was ahead of the pace of expansion of supply,” Nabiullina said at a press conference following a meeting of the Board of Directors of the Bank of Russia.
According to the head of the Central Bank, the regulator’s forecast assumed a rate cut, but following a slowdown in inflation. However, people felt that the Central Bank intends to reduce the rate in any case. Ms. Nabiullina explained that this motivated people and business not to reduce the demand for loans. Because of this, the overheating of the economy turned out to be too strong, which led to an accelerated rise in prices.
“If we consider that demand overheating is the result of a powerful budget impulse, should we understand that as long as the budget impulse persists, both demand overheating and tight monetary policy will continue, respectively? An interesting question, ” Sergey Khestanov, economist, associate professor of RANEPA says.