CBR expects annual inflation of 5% by Oct, 5.8% by year's end amid growing demand, weak ruble
MOSCOW. Aug 1 (Interfax) - Annual inflation in Russia will exceed the target of 4% in the third quarter of 2023 and continue to accelerate in the fourth quarter, the Central Bank of Russia (CBR) said in a monetary policy report published on Monday.
Annual inflation could amount to 5% at the end of the third quarter, which is the so-called "central point of the forecast range," and accelerate to 5.8% by the end of the year (range of 5%-6.5%), the report indicated.
Factors that will affect the rate of inflation include the effect of the weakening of the ruble, which has so far manifested itself moderately but will do so "more fully" going forward, the CBR said.
"The deterioration of trade conditions due to both low export prices and lower physical export volumes, combined with the growth of imports, has led to a significant weakening of the ruble's exchange rate. The transfer of the weakening of the ruble's exchange rate to prices was moderate in the first half of the year. In the second half of the year it will manifest itself to a greater degree," the report said.
The effect of the low base of the spring of 2022 is having a lesser and lesser impact on the annual rate of inflation, the CBR said.
"The growth of inflation pressure is manifesting itself in an increasingly wider circle of goods and services. By the estimates of the Bank of Russia, the component of inflation adjusted for seasonality and incidental shocks is also accelerating and is at a higher level, which points to the growth of sustained inflationary pressure," the report said.
The main factor fueling inflation is "significantly faster" than expected growth of domestic demand, the CBR said.
"Adaptation to the new assortment took place earlier than expected. Further expansion of demand could exceed ability to increase production. The shortage of labor resources will lead to the growth of inflationary pressure from businesses' rising labor costs," the report said.