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action necessary, and inflation will return to target. Those central banks have extensive experience in the field of inflation targeting. Therefore, with inflation expectations in

underlying assets include securities, goods, foreign currency, interest rates, the rate of inflation, official statistics, physical, biological and (or) chemical environmental indicators, as well as

for obligations of the Government of the Russian Federation, debt achieving the inflation target. The key rate is set by the Bank obligations of other

in inflation, fuelled by rapidly recovering demand and persistent supply-side restrictions related to the pandemic. In addition, there are one-off drivers behind the accelerating inflation,

2017 2018 2019 2020 2021 CPI Overall inflation Food Inflation target Non-food Services Trend inflation (5-year rolling window) Inflation target Source: Rosstat, R&F Department

6 4 2 0 2017 2018 2019 2020 2021 Observed inflation Expected inflation Annual inflation Inflation expectations of households stand close to their four-year highs

a MB MB MB MBs’ percentage in inflation % 2021 100 34 11 12 14 13 11 5 Inflation % YoY Jul21 6.5 6.3 6.

rate, and inflation expectations remain high. In August, annual inflation was 6.7%. According to the steady indicators of inflation measuring the inflation rate without

high inflation expectations, the balance of risks for inflation is tilted to the upside. This may bring about a more sustained deviation of inflation from

inflation expectations being relatively stable and even lowering, do not contradict price stability. Conversely, high inflation expectations that might entail a longer-lasting deviation of inflation