Russian central bank issues inflation warning

The regulator sees consumer prices rising again in May

The Bank of Russia (CBR) warned on Wednesday that annual inflation could accelerate above its 4% target this year, noting also that it expects the country’s economic recovery to continue.

According to the forecast, given the current monetary-policy stance, price growth could be somewhere between 4.5% and 6.5% in 2023, returning to 4% in 2024 and remaining close to 4% in the future.

“Annual inflation will be rising from May as the low values recorded in summer-to-autumn 2022 are not included in the inflation calculation,” the regulator stated.

In March, the reading dropped below the central bank’s target for the first time in a year and continued to slow down “because of the high base effect,” while the significant price growth of April 2022 was excluded from the inflation calculation over the last 12 months. Seasonally adjusted monthly price-growth rates slightly increased in April 2023 but remained moderate, CBR said.

According to the bank’s governor Elvira Nabiullina, consumer demand has been recovering as the Russian economy has adapted to sanctions quicker than expected, while supply has failed to keep up.

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The regulator has held its key interest rate unchanged of late, at 7.5%, saying the economy will recover this year and grow by as much as 2%. CBR warned, however, it may need to hike the rate at future meetings in case of an inflationary rise.

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