Growing consumer demand, weakening ruble increase pro-inflationary risks - Central Bank analysts
MOSCOW. May 30 (Interfax) - Rising consumer demand and a weakening ruble could boost current consumer price growth and accelerate annual inflation, Central Bank of Russia Research and Forecasting Department analysts said in their latest Talking Trends bulletin.
"In this case, a tighter monetary policy may be needed to keep inflation at the target level in 2024," they said.
The analysts recalled the time lags with which monetary policy decisions translate into inflation dynamics. "This means nominal interest rates will have to rise faster than the acceleration of price growth and its impact on growth of inflationary expectations," the analysts said.
The lowering of the non-oil deficit from the current level to the level approved in the budget law for this and subsequent years - that is, a return to fiscal rule parameters - should contain aggregate demand in the second half of 2023 and beyond. "This could be a disinflationary factor that reduces the need for tighter monetary policy," the analysts said.
Consumer prices continued to rise moderately in April-May but the growth of sustainable price components, tilted to the downside, sped up. Concurrently, the production sector reported an increasingly pronounced outrunning growth of prices for consumer goods. This suggests that inflationary pressures are likely to mount and necessitate an increase in the key rate to deliver on the inflation target of close to 4% in 2024, the regulator said.