In this quarterly material, the Bank of Russia provides a detailed description of its view of the economic situation and publishes the macroeconomic forecast underlying its key rate decisions.
Inflationary pressure and inflation expectations decline
Macroeconomic forecast has been materially revised
Monetary conditions remain tight
Key rate decisions will be made considering the need for the economy’s
Inflationary pressure and inflation expectations decline
In April, inflationary pressure declines after soaring at the beginning of March. This was assisted by the dissipation of households’ surging demand and a stronger ruble. In April, households’ inflation expectations returned to the levels of the middle of the previous year. When answering questions, respondents noted that, in their estimations, the main growth of prices had already materialised, therefore prices would not rise as quickly in the future. Businesses’ short-term price expectations also declined, though remaining above the previous year’s readings.
Inflation, households’ inflation expectations and key rate
Macroeconomic forecast has been materially revised
The external environment for the Russian economy remains challenging and significantly constrains economic activity. The ongoing changes have led to a considerable revision of the Bank of Russia’s macroeconomic forecast. The current economic situation is mainly characterised by a faster contraction of supply compared to demand. This is exactly what creates the main inflationary pressure. The tremendous uncertainty of the situation is manifested in higher risks to the forecast.
Key forecast parameters
| 2021 (actual) |
2022 | 2023 | 2024 | |
|---|---|---|---|---|
| Annual inflation | 8.4 | 18.0 — 23.0 | 5.0 — 7.0 | 4.0 |
| Gross domestic product | 4.7 | - (8.0 — 10.0) | (-3.0) — 0.0 | 2.5 — 3.5 |
| — % change, Q4 on Q4 of the previous year | 5.0 | - (12.5 — 16.5) | 4.0 — 5.5 | 1.0 — 2.0 |
| Exports | 3,5 | - (17.0 — 21.0) | - (4.0 — 8.0) | (-1.0) — 1.0 |
| Imports | 16.9 | - (32.5 — 36.5) | (-2.5) — 1.5 | 2.0 — 4.0 |
| Banking system’s claims on the economy in rubles and foreign currency, including: | 13,9 | (-1) — 4 | 8 — 13 | 9 — 14 |
| ● on businesses | 10.7 | 0 — 5 | 9 — 14 | 8 — 13 |
| ● on households, including: | 22.0 | (-4) — 1 | 7 — 12 | 13 — 18 |
| — housing mortgage loans | 26.7 | 10 — 15 | 10 — 15 | 10 — 15 |
Monetary conditions remain tight
The ruble exchange rate and OFZ yields have returned to
OFZ yields and Bank of Russia key rate, % p.a.
Key rate decisions will be made considering the need for the economy’s adaptation
At the end of February, in order to limit risks to financial stability the Bank of Russia raised the key rate to 20%. As the situation stabilised, the Bank of Russia began to reduce the key rate. Price stability remains an indisputable priority of monetary policy. All the same, during this period, the Bank of Russia is to take into account the processes of adaptation and structural transformation evolving in the economy. They are inevitably accompanied by temporary and elevated inflation levels. Monetary policy will retain the required disinflationary impact and ensure the return of inflation to 4% in 2024.
Average annual key rate and its forecast, % p.a.
