Central Bank of Russia repeats signal about need to maintain tight monetary conditions to lower inflation

MOSCOW. Jan 20 (Interfax) - Pressure from stable components of inflation remains high, and demand growth continues to considerably outpace capacity to increase output of goods and services, which is why the Central Bank of Russia is keeping its key rate at high, the regulator said in a commentary.

"Tight monetary conditions have to remain high in order to slow inflation and return it to the target," the regulator said.

The Central Bank expects inflation to return to the 4% target in 2026 and to remain at that level going forward.

Seasonally adjusted year-on-year inflation was 14.2% in December and 13.8% in November 2024, and 11.3% in Q3, 8.8% in Q2 and 5.9% in Q1 2024. Annual inflation quickened to 9.52% in December from 8.88% in November.

"Most stable price growth indicators increased compared to the previous month, evidence that the expansion of domestic demand continues to significantly outpace capacity to increase physical output. The weakening of the ruble that occurred in previous months is an additional inflationary factor affecting prices for a wide range of goods and services," the Central Bank said.

Goods and services with volatile price dynamics made a less significant contribution to inflation in December than in November, but this remained positive. This reduction was mainly due to slower price growth for communications services, which rose sharply in November, and for fruit and vegetables, the Central Bank said.