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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

Source: Bank of Russia, Rosstat.

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

Growth, % YoY, unless indicated otherwise
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  13  14
● on businesses 10.7 0  5  14  13
● on households, including: 22.0 (-4)  1  12 13  18
— housing mortgage loans 26.7 10  15 10  15 10  15

Source: Bank of Russia.

Monetary conditions remain tight

The ruble exchange rate and OFZ yields have returned to mid-February levels. Risks to financial stability have abated. Nevertheless, amid general uncertainty the risk premium included in lending rates has increased. In addition, banks’ requirements for borrowers and loan collateral have become much tougher. This shapes strict price and non-price lending conditions. The key rate decrease will help alleviate the acuteness of this situation.

OFZ yields and Bank of Russia key rate, % p.a.

* The maximum interest rate on deposits in Russian rubles of the top ten credit institutions attracting the largest amount of households’ deposits.

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.

Moving forward, in its key rate decision-making the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as risks posed by domestic and external conditions and the reaction of financial markets. If the situation develops in line with the baseline forecast, the Bank of Russia holds open the prospect of further key rate reduction at its upcoming meetings throughout 2022.
Department responsible for publication: Monetary Policy Department
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Last updated on: 22.11.2023