CBR expects ruble's drop in March to keep putting upward pressure on inflation

MOSCOW. April 14 (Interfax) - The weakening of the ruble in March will continue to put considerable upward pressure on inflation in Russia with a lag, the Central Bank of Russia (CBR) said.

"Heightened exchange rate volatility, as well as lagging effects will continue to exert considerable pro-inflationary influence," the CBR said in comments on inflation.

Inflation in Russia accelerated in March due to the depreciation of the ruble and surge in consumer demand amid the imposition of sanctions against the country, the CBR recalled. Consumer prices rose 7.53% in the month (seasonally adjusted) and annual inflation surged to 16.69%.

"Most of the price surge came in the first half of March, after which the strengthening of the ruble and waning effects of feverish demand led to a slowdown of growth or decrease in prices for many goods," the CBR said. The appreciation of the ruble in the second half of March offset the preceding drop of the currency to a significant degree, the CBR said.

Annual inflation will continue to rise due to the effect of the base, but the "monetary policy pursued by the Bank of Russia will set the stage for the economy's gradual adaptation to the new conditions and the return of annual inflation to 4% in 2024," the CBR said.

The ruble's nominal exchange rate plunged by about 40% in the first quarter of 2022 against the main currencies of trading partners - the U.S. dollar, euro and Chinese yuan. Most of this drop occurred in the first half of the month, and in mid-March the ruble was down by about a third from the February average, the CBR said.

The ruble's steep slide affected the growth of demand for certain goods and services, the CBR said. In the second half of March the ruble strengthened and by the end of the month it was down less than 10% from the February average.