Monetary Policy Report

The key rate remains unchanged

Inflation forecast
for the year-end 2021

If the situation develops in line with the baseline forecast, the Bank of Russia will determine the timeline and pace of a return to neutral monetary policy

The economic situation
is better than expected

GDP growth rate, YoY

According to the Bank of Russia’s assessment, economic activity continued to bounce back at the end of 2020. This upward trend was associated with several factors. First of all, anti-pandemic measures in autumn and winter were not as tough as in spring. Both households and businesses adjusted faster to the resurgence of coronavirus cases. Consumer demand was not affected. External demand for Russian exports at the end of 2020 exceeded expectations owing to a recovery in the global economy. This was mainly driven by the start of mass vaccination and fiscal stimuli in a range of advanced economies.

The Bank of Russia assumes that demand in the economy will be recovering steadily further on. Nonetheless, the recovery pace may vary across industries. The Bank of Russia keeps unchanged its 2021 GDP growth forecast at 3–4%. The economy may reach its pre-pandemic levels already by late 2021.

Inflation forecast for
2021 has been increased

Inflation and the Bank of Russia, YoY

Annual price growth sped up to 5.2% in January 2021. This elevated inflation rate largely resulted from the pass-through of the ruble’s weakening in 2020 and price growth in certain food markets. However, these factors may have a longer-lasting effect on prices than was expected, due to the previous increase in households’ and businesses’ inflation expectations and persistent supply-side constraints.

The Bank of Russia forecasts that inflation will pass its peak in February–March, after which it will be going down incrementally. Beginning from March, the statistical base effect will also play a significant role in the decrease in annual inflation. According to the forecast, prices will grow by 3.7%–4.2% over the year, taking into account the monetary policy pursued.

Monetary conditions
remain accommodative

OFZ yields and the Bank of Russia key rate, %

While nominal interest rates on loans and deposits changed only slightly, price conditions eased in real terms given the rise in inflation.

Yields on federal government bonds increased somewhat amid the rise in inflation expectations, the growth of long-term interest rates in global financial markets, and remaining geopolitical tensions.

In 2021, monetary conditions will remain accommodative and promote recovery growth in Russia’s economy.

Disinflationary risks
no longer prevail in 2021

Overall, there is a balance between proinflationary and disinflationary risks over the forecast horizon.

Proinflationary risks are associated with the situation in global commodity markets, the impact of the epidemic situation on companies’ costs, elevated inflation expectations, and potential price spikes in a range of segments (e.g. in services).

Disinflationary risks may be caused by fiscal policy normalisation, the uncertainty about consumer behaviour, a possibility that demand will shift towards outbound tourism services, and a reduction in companies’ costs after the termination of the anti-pandemic restrictions.


If the situation develops in line with the baseline forecast, the Bank of Russia will determine the timeline and pace of a return to neutral monetary policy taking into account the still high heterogeneity of current economic and price movement trends, actual and expected inflation dynamics relative to the target, economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets.