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In 2022, the Russian economy entered the phase of a structural transformation of the economy due to unprecedented restrictions imposed on trade and finance. The objective of state authorities is to promote conditions that would enhance the efficiency of the transformation of the economy and limit the decline in economic activity without creating risks to macroeconomic stability.


Goals and principles

The goal of the Bank of Russia’s monetary policy is to protect the ruble and ensure its strength. The Bank of Russia ensures the strength of the ruble by maintaining price stability which is essential for balanced and sustainable economic growth. Price stability implies steadily low inflation. It protects households’ incomes and savings, makes economic conditions for companies and households more predictable, and contributes to higher affordability of debt financing for companies.

Maintaining price stability, the Bank of Russia pursues the inflation targeting strategy. The advantage of this strategy is its flexibility, which is crucial for addressing the tasks of the transformation of the Russian economy in the next few years.  The Bank of Russia chooses such a path for returning inflation to the target that would also minimise the deviation of output from its potential. Thus, the Bank of Russia promotes the stability and predictability of economic conditions necessary for the transformation and development.

Monetary policy principles:


Monetary policy in late 2021 and 2022

Sources: Rosstat, Bank of Russia.

❶ Key rate increase in response to inflation acceleration due to demand expansion surpassing capacities to ramp up output (December 2021–mid-February 2022)

❷ Response to severe threats to price and financial stability (late February–March 2022)

❸ Key rate decrease as the situation stabilises (April–mid-September 2022)

❹ Keeping the key rate unchanged amid a considerable rise of uncertainty (mid-September–October 2022)

❺ Future decisions

Bank of Russia will make its further decisions on the key rate, taking into account actual and expected inflation movements relative to the target, the process of the structural transformation of the economy, as well as assessing risks from internal and external conditions and financial markets’ response to these risks.


Forecast scenarios

The Bank of Russia’s forecast scenarios factor in the extraordinary changes of 2022 in the internal and external environment for the Russian economy, as well as their possible evolution. Speaking of internal conditions, the most critical factor is how successfully and quickly people and companies will be able to adapt to the new reality. As regards external conditions, there is still high uncertainty over the medium-term horizon about a large number of factors: inflation persistence and monetary policy tightening, demand trends and bottlenecks in global supply chains, volatility in the food and commodity markets, large amounts of accumulated debts, anti-pandemic measures, and geopolitical tensions.

 The characteristics of the baseline and alternative scenarios associated with these circumstances are as follows:

  • The state of the world economy that depends on how quickly supply-side problems are settled, how well inflation expectations are anchored, what response measures are taken by central banks, and how stable economic agents’ financial position is amid rising monetary policy rates in advanced economies (namely, the USA and the euro area).
  • The pace of the adaptation of the Russian economy to the new conditions that depends on the establishment of new economic relations, the launch of new production facilities, the efficiency of import substitution processes, and the development of parallel import mechanisms.
  • The impact of geopolitical conditions on the Russian economy depends on whether or not foreign countries will impose additional sanctions on external trade and how significant the secondary effects of the sanctions may be, including non-formal restrictions from a wide range of counterparties.

Baseline scenario

2022 2023 2024 2025
Annual inflation 8.4 12.0  13.0 5.0  7.0 4.0 4.0
Gross domestic product 4.7 (-3.5)  (-3.0) (-4.0)  (-1.0) 1.5  2.5 1.5  2.5
— % change in Q4 YoY 5.0 (-7.8)  (-6.4) 0.0  1.5 0.5  1.5 1.5  2.5
Key rate, % p.a., yearly average 5.7 10.6 6.5  8.5 6.0  7.0 5.0  6.0
Banking system’s claims on the economy in rubles and foreign currency, including: 13.9 12  13  14 13
● on organisations 10.7 10  13 12  13  13
● on households, including: 22.0 7  10 14 14 13
— housing mortgage loans 26.7 14  17 10  15 10  15 10  15

Source: Bank of Russia.

In the baseline scenario, the world economy continues to develop within the already existing trends. Central banks of the largest economies will tighten their monetary policies in response to persistently high inflation. This will slow down the growth of the world economy. Monetary policy tightening amid elevated market volatility increases risks to financial stability. Nonetheless, the baseline scenario does not assume their materialisation. By pursuing a well-calibrated monetary policy, the largest economies will be able to avoid a large-scale recession. Inflation abroad will return close to the target in 2024 H1. Most of the sanctions enacted against the Russian economy will remain over the entire forecast horizon.

The baseline scenario assumes that the Russian economy will be contracting in 2022 and for the most part of 2023, adjusting to the changed external conditions. The economy will resume growth only in 2023 H2. In 2024, recovery growth will continue. In 2025, the pace of economic growth will stabilise in the range of 1.5–2.5%.

Given the monetary policy pursued, annual inflation will equal 12.0–13.0% in 2022, decelerate to 5.0–7.0% in 2023, return to 4% in 2024, and stay close to the target further on. The return of inflation to the target will be gradual, including due to the inevitable adjustment of relative prices for a broad range of goods and services in the course of the structural transformation of the Russian economy.

In its baseline scenario, the Bank of Russia forecasts that the average key rate will be 10.6% per annum in 2022 and in the range of 6.5–8.5% per annum in 2023 and 6–7% per annum in 2024. By 2025, the Bank of Russia will return the key rate to its long-term neutral range. The Bank of Russia relies on the assessment of the longer-run nominal neutral key rate equalling 5.0–6.0% p.a. However, during the period of the structural transformation of the economy, the uncertainty of its estimates is higher. There are factors that might both increase and decrease the level of the neutral rate. The Bank of Russia will assess the overall effect of these factors on the neutral rate as it accumulates relevant information.

Fast Adaptation

The alternative scenario Fast Adaptation assumes a quicker adjustment of the Russian economy to the new conditions, as compared to the baseline scenario, with the state of the world economy and the geopolitical environment being similar. Although central banks of the major countries will raise their policy rates, the world economy will avoid a large-scale recession. The geopolitical environment will not change relative to mid-2022.

A faster structural transformation of the economy will be primarily driven by better import dynamics than forecast in the baseline scenario. New economic relations to be established and the expansion of parallel imports will also boost imports over the forecast horizon.

The value of exports will increase as well, as compared to the baseline scenario, boosted by growing quantities of exports, including of oil and gas. This upward trend will be encouraged by the development of new supply routes and energy commodity delivery methods, as well as a reduction in transportation, insurance and other logistics costs.

Under the Fast Adaptation scenario, the Russian economy will be mainly boosted by a quick rebound of domestic demand. According to this scenario, the Russian economy might start to grow as early as 2023 thanks to new partnerships and economic relations. Supply-side constraints will dissipate faster owing to a quick saturation of markets with both new goods and common items through the parallel import mechanism. As a result, annual inflation will return to the level close to the target already by the end of 2023 amid a more accommodative monetary policy than under the baseline scenario. In 2024–2025, annual inflation will stay close to 4%, with the key rate being in the neutral range of 5.0–6.0% p.a.

Global Crisis

According to the alternative scenario Global Crisis, the fragmentation in the world economy will intensify. Trade between countries will concentrate increasingly more in regional blocks. Countries will focus less on using relative advantages and more — on increasing the localisation of production facilities. In this context, the scenario assumes that two risks strengthening each other will materialise simultaneously in early 2023.

First, the situation in the world economy under this scenario significantly worsens as compared to the baseline scenario. An increase in policy rates currently expected in the largest economies might turn out to be insufficient to ensure a steady slowdown of inflation. As a result of rising policy rates, asset prices will go down, while debt servicing costs will rise. A less predictable and higher path of policy rates amid large accumulated debts and declining demand might force investors to reassess financial solvency of borrowers with unsteady incomes and cause a revaluation of high-risk assets in the market.

Secondly, this scenario assumes an escalation of geopolitical tensions globally, including new sanctions that might be enacted against the Russian economy. The combination of these events might aggravate imbalances in the world economy and provoke a new global financial and economic crisis, the scale of which might be comparable with that of the 2007–2008 crisis.

A global crisis decreasing external demand coupled with a worsening of the geopolitical environment reducing export prices and quantities will considerably complicate the structural transformation of the Russian economy and its adaptation to the new conditions. GDP will contract in 2023 more than in 2022. It will continue to decline in 2024 and might slightly grow by about 1% only in 2025.

Annual inflation will speed up to 13–16% in 2023 amid a weakening of the ruble and more severe supply-side constraints, and inflation expectations will rise as well. The Bank of Russia will raise the key rate significantly as compared to the baseline scenario and will maintain it at the increased level in order to prevent secondary effects that might be caused by higher inflation expectations and bring inflation back to the target in 2025.


Use of monetary policy instruments

Sources: Bank of Russia.

The operational objective of the Bank of Russia’s monetary policy is to keep overnight money market rates close to the key rate. Over January—the first half of October 2022, the average deviation of RUONIA (the operational benchmark of monetary policy) from the Bank of Russia key rate equalled −19 basis points, which is slightly more than in 2021. The spread volatility also increased during this period to 37 basis points (vs 21 basis points over 2021).

According to the experience of 2022, the system of the Bank of Russia’s monetary policy instruments made it possible to fully meet banks’ demand for liquidity and offset the impact of external factors even in the conditions of extremely high volatility. Despite the extraordinary shocks that the banking sector had to address, the existing operational procedure demonstrated its efficiency and flexibility and helped stabilise the situation over a short period. The earlier achieved stability of the banking system is essential as well. By the moment of the crisis, banks had a sufficient amount of high-quality assets that they were able to use for raising the required liquidity from the Bank of Russia. The support measures implemented by the Bank of Russia ensured the smooth functioning of banks and helped gradually restore turnovers in the short-term interbank lending segment of the money market to the level of early 2022 on average.


Additional materials



11. Macroeconomic and banking statistics

12. Statistics on the use of monetary policy instruments

13. Schedule of Bank of Russia auctions in 2023

14. Required reserves averaging periods in 2023

Department responsible for publication: Monetary Policy Department
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Last updated on: 02.11.2022