Moscow: On Friday, the Bank of Russia (CBR) maintained its benchmark interest rate at 7.5%, predicting that the economy will recover this year and expand by as much as 2%. Elvira Nabiullina, governor of the CBR, commented on the choice, stating that certain factors might jeopardise the regulator's intention to bring inflation back to its 4% target.
"In regards to the dangers that might cause inflation to deviate from the initial forecast. There are inflation-promoting factors, and while we anticipate some acceleration and an increase in core inflation, we do not anticipate double-digit inflation, the expert said.
The Russian economy has been adapting to the sanctions faster than anticipated, and as a result, consumer demand has been increasing, the central bank claims, while supply has been unable to keep up. As a result, inflation has decreased.
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We will also keep a close eye on how the budget policy is being applied, she added. "We move forward with the government's proposed budget plans, but tightening monetary policy will be necessary if the structural budget deficit increases.
However, we must consider the entire set of variables because some disinflationary elements might offset inflationary influences.
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The CBR reports that while GDP dynamics are higher, inflation is slightly below its February forecast. "This year, we anticipate that the economic recovery will continue, possibly with increased inflationary pressure.
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Nabiullina noted that if there are signs of an acceleration in inflation "that will threaten achieving 4% inflation in 2024," adding that this will depend largely on demand-side factors. The central bank might then need to increase the key rate at subsequent meetings.