Inflation decline is accompanied by sustainable economic growth

Slowdown in price growth observed in July-August has increased the likelihood of achieving the 4% target for inflation by the end of 2017. However, the risk of overshooting the inflation target remains in the medium term, as noted in the regular issue of the Bulletin Talking Trends prepared by the Bank of Russia’s Research and Forecasting Department.

In July-August, inflation perceptibly slowed down and was below the target level for the first time since the adoption of inflation targeting by the Bank of Russia. Alongside this, households’ inflation expectations dropped to all-time lows. Inflation slowdown observed in recent months evolved amid the later-than-expected arrival of fruit and vegetable harvest to the market. The Bulletin notes that the risks of additional inflationary pressures are currently linked to accelerated growth in consumer demand and contracted fruit and vegetables stocks carried over to the next year.

Despite somewhat lowered momentum in economic activity after the strong results of 2017Q2, economic growth remains robust and sustainable. Both consumer and investment demand demonstrate growth amid improved consumer sentiment. According to the authors of the Bulletin, domestic demand is recovering at a faster pace than industrial growth, which points to a positive outlook for industrial output in the short term.

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