Bank of Russia policy helps anchor inflation close to 4%

Photo: Vitaliy Timkiv / TASS

Inflation will anchor close to 4% after the cessation of the influence of temporary factors and as a result of earlier monetary policy decisions that have a time-lagged effect. These are the findings by the authors of the latest issue of Talking Trends, the Bank of Russia’s Research and Forecasting Department’s bulletin.

Annual inflation will continue to go down in the next few months and will decrease to 3% in early 2020, being driven downwards by a number of disinflationary factors, mostly temporary ones, and as a result of factoring out the effect of the VAT rate hike from the calculation base. Moreover, inflationary pressure, defined as growth in prices for the consumer basket components which are the most resistant to the impact of temporary factors, reduced below the level corresponding to 4% annual inflation, thus creating the environment for the easing of monetary policy.

Economic activity was subdued in Q3, primarily because of the persisting slowdown in the world economy. However, estimated annual GDP growth sped up in Q3, including as a result of a rich harvest. Economic growth is expected to slightly accelerate in the upcoming quarters.

The views and recommendations expressed in the bulletin do not necessarily reflect the official position of the Bank of Russia.

6 November 2019

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