Tight monetary policy to limit excessive rise in demand, its pro-inflationary effect - Russian Central Bank

MOSCOW. April 15 (Interfax) - The Central Bank of Russia has reiterated the need to maintain tight monetary conditions for an extended period in order to reduce inflation, the CBR said in a commentary.

The main pro-inflationary factor is high domestic demand, which continues to outstrip the possibilities for expanding supply, the CBR said in the commentary.

"Tight monetary policy should limit excessive growth in domestic demand and its pro-inflationary consequences, according to the forecast of the Bank of Russia. Monetary policy will be aimed at further reducing sustainable price pressure in order to maintain price stability," the CBR said.

Accounting for the current monetary policy, annual inflation should decline to 4%-4.5% in 2024 and should be close to 4% going forward.

The Central Bank board of directors holds its next rate-setting meeting in April 26. It kept the key rate at 16% at its meetings in February and March 2024.

According to Rosstat data for the first eight days of April this year and last, annual inflation in Russia was 7.75% as of April 8, compared with 7.72% at the end of March - the Central Bank advocates this methodology. Annual inflation quickened to 7.79% based on average daily data for the whole of April 2023 - the Russian Economic Development Ministry calculates annual inflation this way.

Inflation in Russia slowed to 0.39% in March from 0.68% in February. Seasonally adjusted growth in annual terms slowed to 4.5% in March.

"In March, the current inflation rate was considerably lower than in autumn but still above target. The deceleration was associated mainly with volatile prices for passenger transport services and foreign travel. Estimates of sustainable inflation changed in different directions," the Central Bank said in the commentary.

It said inflation and the sustainable component of monthly price growth above 4% were kept by high domestic demand.