Proinflationary risks in Russia have not yet materialized, no indications at moment that they will materialize in future - Belousov

MOSCOW. April 24 (Interfax) - The Russian government's 2023 inflation forecast of 5.3% is well-considered, and despite the existence of proinflationary risks, they have not yet materialized and there is no indication currently that they will be realized in the future, First Deputy Prime Minister Andrei Belousov told reporters, commenting the moderate discrepancies between the government and Central Bank inflation forecasts for the current year.

As reported, the government in April lowered its 2023 inflation forecast for Russia to 5.3% (from 5.5% in the previous version of the forecast), which is close to the lower threshold of the current Central Bank forecast for 2023 (5.0-7.0%).

"A rather well-considered estimate [at 5.3%]. I agree that they [proinflationary risks] exist, but so far they have not materialized, and we do not see signs that far that they will be realized," Belousov said when asked whether he agreed with the position of the Central Bank that proinflationary risks now prevail.

As reported, annual inflation in Russia as of April 17 slowed to about 2.63% from 2.8% on April 10 and from 3.51% at the end of March if calculated on a weekly basis, and slowed to 2.82% based on the average daily data for April 2022 (the Economic Development Ministry in February switched to this method of calculation). The minimum values of annual inflation can be achieved in April, but then, starting from May, it is possible that it will begin to grow relative to the low base of last year (in May 2022 inflation was only 0.12%).

The CBR Board of Governors at its March 17 meeting expectedly held its key rate at 7.5%, and left the signal unchanged, noting that the balance of risks for inflation had not changed significantly since the previous meeting on February 10.

"If proinflationary risks intensify, the CBR will assess the advisability of raising the key rate at the next meetings," the Central Bank said, repeating its February comment verbatim.

At a press conference on March 17, Central Bank Governor Elvira Nabiullina also reiterated her February thesis that the probability of a rate hike this year was higher than the likelihood of 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.