Annual inflation in Russia in April to fall below 3%, important to avoid its acceleration as well as 'excessive slowing' - Putin
MOSCOW. April 11 (Interfax) - Inflation in Russia in annual terms by the end of April will fall below 3%, and it is important to avoid not only excessive acceleration of inflation, but also excessive slowing, Russian President Vladimir Putin said at a meeting on economic issues.
"As of April 3, inflation had fallen to 3.3% in annual terms, and by the end of the month it is expected to be less than 3%. For the first time in a long, long time, inflation was below the Central Bank's target [annual inflation below 4% for the first time since October 2020]," the president said.
"I would like to repeat - it is important to avoid not only excessive acceleration of inflation, but also its excessive slowing, as this can have a negative impact on economic activity as a whole," Putin said.
"We all understand this very well. [Excessively low inflation] can also affect plans by business to expand production, develop new products and create jobs. And of course, this affects the incomes of citizens and the volume of budget revenues," he said.
"From the point of view of the interests of citizens, low inflation, of course, is a very positive thing, since it leads to an increase in real incomes, real wages. This, of course, is a positive factor, but this factor must be seen from all angles. All factors that affect consumer prices, including the ruble's exchange rate, the state of the foreign exchange market and movement of capital must be taken into consideration," Putin said.
The Central Bank of Russia's board of directors, as expected, left the key interest rate unchanged at 7.5% at its meeting on March 17, and also left its messaging unchanged, remarking that the balance of risks for inflation had not changed significantly since the previous meeting on February 10.
"If pro-inflationary risks increase, the Bank of Russia will assess the advisability of raising the key rate at upcoming meetings," the CBR said, repeating its February statement.
Central Bank chief Elvira Nabiullina, speaking at a press conference on March 17, also repeated her February statement that there is a higher chance of a rate hike this year than a rate cut.
Central Bank Deputy Governor Alexei Zabotkin said last week that annual inflation in Russia, after falling below the 4% target in March-April, would gradually begin to rise in May-June, and the inflation forecast for the end of 2023 at 5-7% has not yet changed.
"There were high figures - February, March, April last year - and when we have these record highs, then our annual inflation slows rapidly. Starting from May and in the following months, the price growth was very low, and in a number of months even, you will recall, it was negative. Accordingly, when these months are removed from the calculation of annual inflation, then the rate of growth for annual inflation will increase," he said.
Zabotkin also repeated the Central Bank's signal about the direction of monetary policy: it will assess the feasibility of raising the key rate at its upcoming sessions.
"The board of directors notes the strengthening of pro-inflationary risks from external conditions and the continuing significant contribution of budget policy to the expansion of aggregate demand this year. If pro-inflationary risks increase, the Board of Directors will assess the feasibility of raising the rate at its upcoming sessions, but, again, the decision is not a foregone conclusion," he said.
The Central Bank's inflation forecast for 2023 is 5-7%.The Russian Economic Development Ministry thinks 5.5% and analysts told Interfax in a consensus forecast at the beginning of April that inflation might be 6.2% in 2023.