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In its quarterly Monetary Policy Report, the Bank of Russia presents its assessments of the current economic situation and its macroeconomic forecast which is the basis for making key rate decisions.

Annual inflation has dropped because of the previous year’s high base

Current price growth is accelerating gradually

The GDP forecast for 2023 has been raised notably

Monetary conditions remain neutral overall

The Bank of Russia will set the key rate path so as to bring inflation back to 4% in 2024 and stabilise it at this level


Steady price pressure has been intensifying

The annual inflation rate is temporarily at lower levels because of the high base of spring 2022. Furthermore, in recent months, inflation has been still contained by one-off factors, the impact of which has turned out to be stronger and longer-lasting. Specifically, the high harvest is weakening price pressure in food markets. In addition, price growth is limited owing to large stocks of a number of product groups. However, current price growth rates have been rising gradually from late 2022 to reach 4% by now in annualised terms. The Bank of Russia forecasts that prices will grow by 4.5–6.5% over the year in general.

Inflation, inflation expectations and Bank of Russia key rate

Source: Rosstat, Bank of Russia.

Economic activity continues to increase

Companies continue to adjust to the new environment. This process is supported by the expansion of both public and private demand. Exports are contracting, whereas imports are recovering. Many companies have managed to refocus on domestic alternatives of Western investment equipment. However, a faster increase in output is impeded by resource constraints, specifically in the labour market. In February 2023, the unemployment rate dropped to a new record low of 3.4%.

Considering a quicker adaptation of the economy to the new environment, the Bank of Russia has raised its forecast of GDP growth in 2023 to 0.5–2.0%.

Key forecast parameters

Growth, % YoY, unless indicated otherwise

2023 2024 2025
Inflation, % change, Dec on Dec 11.9 4.5–6.5 4.0 4.0
Gross domestic product −2.1 0.5–2.0 0.5–2.5 1.5–2.5
% change, Q4 on Q4 of the previous year −2.7 (−0.5)–(+1.0) 0.5–2.5 1.5–2.5
Household final consumption expenditure −1.4 3.5–5.5 1.0–3.0 1.5–2.5
Gross fixed capital formation 3.3 0.0–3.0 (−2.5)–(+0.5) 1.0–3.0
Banking system’s claims on the economy in rubles and foreign currency, including: 12.0 10–14 9–14 8–13
on businesses 13.2 9–13 8–13 8–13
on households, including: 9.4 11–15 9–14 8–13
housing mortgage loans 17.6 13–17 10–15 10–15

Source: Bank of Russia.

Monetary conditions remain neutral overall

Since the February meeting, the difference in interest rates on short- and long-term federal government bonds has increased slightly more. Yields on long-term OFZ bonds remain elevated, which is associated with concerns about a rise in inflation and government borrowings. Nevertheless, with credit rates at the current level, both the corporate and retail segments of the credit market continued to bounce back. Households’ propensity to save has been declining gradually.

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

Source: Bank of Russia.

* Maximum ruble deposit rate in the top ten banks.


The Bank of Russia will set the key rate path so as to bring inflation back to 4% in 2024 and stabilise it at this level

The ratio of risks over the medium-term horizon is still shifted towards proinflationary ones. If aggregate demand exceeds the potential to expand supply, the further recovery of the economy might be accompanied by a rise in inflationary pressure. To bring inflation to 4% in 2024, the Bank of Russia might need a higher level of the key rate. The forecast range of the average key rate in the baseline scenario is 7.3–8.2% for 2023 and 6.5–7.5% for 2024.

Bank of Russia annual key rate, % per annum

The Bank of Russia will make its further decisions on the key rate, taking into account actual and expected inflation movements relative to the target and the progress of the structural transformation of the economy, as well as assessing risks from internal and external conditions and financial markets’ response to these risks. Considering the gradually increasing current inflationary pressure, at its next meetings, the Bank of Russia Board of Directors will explore the need to raise the key rate for stabilising inflation at about 4% in 2024 and further on. The Bank of Russia forecasts that given the monetary policy pursued, annual inflation will equal 4.5–6.5% in 2023 and return to 4% in 2024.
Department responsible for publication: Monetary Policy Department
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Last updated on: 26.05.2023