Inflation is set to remain low

Inflation remains low; however, its path over the past two months proved higher than expected, mainly driven by the impact of temporary factors.  This is the conclusion made by the authors of the Talking Trends, the Bank of Russia’s Research and Forecasting Department’s bulletin.

The medium-term risks of inflation deviating upwards from 4% remain dominant. In particular, it seems highly probable that the envisaged VAT base rate increase to 20% will trigger a temporary acceleration in inflation to a level above 4% in the course of 2019. The Bank of Russia’s policy fosters reduced inflation risks and the anchoring of inflation at a level close to 4% over the forecast horizon.

Russian economic growth over the last few months was consistent with its potential, the bulletin authors note. Having said that, survey data suggest there are certain signs of an emerging slowdown; its causes and sustainability have yet to be determined.

Russian financial markets continue to show low volatility against other emerging market economies.

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

16 July 2018

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