Slowing inflation in Russia to 4% in 2027 requires well-calibrated decisions on further trajectory of rate - CBR analysts
MOSCOW. Oct 14 (Interfax) - The resumption of disinflationary processes and the slowing of inflation to 4% in 2027 requires well-calibrated decisions on the further trajectory of the key rate, according to the Talking Trends bulletin prepared by the Central Bank of Russia's Research and Forecasting Department.
After the increase in utility tariffs in October, annual inflation exceeded 7%, the CBR said. "In order for inflation to follow the trajectory of the Central Bank's July forecast [6%-7% for 2026], a further significant slowdown in the current growth of prices in the persistent component is required already in the near future. This will be possible only in the case of more restrained dynamics of aggregate demand than in the previous quarters of this year, as well as the gradual return of production capacities to operation," the CBR said.
According to the Central Bank's estimates, the indicators of persistent inflation remained at approximately 5%-6% in September. "The balance of risks over the horizon of the coming quarters relative to the Central Bank's baseline forecast remains tilted toward pro-inflationary ones," the CBR said.
The labor market, the overheating of which was one of the important barriers to a faster easing of the CBR's monetary policy, having shown some signs of cooling, is once again adjusting its vector, the Central Bank said.
"There are signs of an interruption of several trends that formed earlier this year. The unemployment rate, which had turned towards slow growth from historical lows, declined in August (adjusted for seasonality). The monthly growth of nominal wages in July accelerated to its maximum since January, and enterprises' plans for wage adjustments this year stopped declining and increased somewhat in September," it said.
In combination with the acceleration of growth in corporate and consumer lending in recent months and the growth of inflation expectations, this may reflect "a noticeable easing of monetary conditions in their perception by households and businesses," the CBR said.
For a number of reasons, the easing of monetary policy will proceed gradually, it said.
"Since the decline in inflation expectations follows the slowing of inflation with a certain lag, and also since the return of the budget to a zero structural primary deficit will occur only in 2029, the reduction in the tightness of monetary policy will occur gradually. A full return to neutral monetary policy within the baseline forecast (that is, in the absence of new lasting shocks and with fiscal policy in accordance with the current plans of the Russian government) will occur by 2029," the Central Bank said.
The CBR previously estimated the neutral rate level at 7.5%-8.5%. This range is set for 2029 in the July forecast.
