VAT hike in Russia contributes just over 1 pp to inflation - Nabiullina

MOSCOW. March 24 (Interfax) - The contribution of tax changes to inflation in Russia has been limited, at just over 1 percentage point, Central Bank Governor Elvira Nabiullina said in the State Duma.

"Everyone was concerned about how the VAT increase and the entire set of tax changes would affect price growth, and whether they would lead to a new round of price increases. We've looked closely at prices in December, January and February. And I can now say the effect was limited. The tax changes certainly contributed to inflation, but only by just over a percentage point," Nabiullina said.

"With a loose monetary policy, the consequences would have been more noticeable; all tax increases would have easily passed through to prices, but this did not happen. This allowed us to continue lowering the key rate and forecasting a further slowdown in inflation. This year, we forecast inflation at 4.5%-5.5% by the end of the year. It will be around 4% in 2027 and beyond," Nabiullina said.

The Central Bank March 20 lowered the key rate by 50 basis points, as it had done on three previous occasions, from 15.5% to 15%. Its next rate-setting meeting is scheduled for April 24.