Inflation stabilises at low level

Lowering inflation expectations and growing confidence in the Bank of Russia’s monetary policy consolidate the basis for inflation stabilisation at a low rate near 4%, notes the Bank of Russia’s Research and Forecasting Department (R&F) in the new issue of the Talking Trends bulletin.

In September inflation decelerated to 3% on the back of tailwinds of a temporary nature associated with a stronger ruble and a benign fruit and vegetable market. The authors estimate that inflation would have stood around 4% if unadjusted for temporary tailwinds. Medium-term risks that inflation may overpass the 4% persist. Amid low unemployment and still elevated inflation expectations, they may materialise if the pace of wage growth exceeds growth in labour productivity.

The performance of short-term economic indicators and survey data suggest that the economy grew in the third quarter in line with its current potential. The inflation slowdown, driven by the Bank of Russia’s moderately tight monetary policy, has a positive effect on the economy as it reduces uncertainty and provides a favourable environment for raising long-term funding, thus fostering more sustainable economic growth. Russian economic growth acceleration will call for the implementation of structural policy measures.

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