Russian Central Bank increases 2023 inflation forecast, expects return to 4% range in 2024

MOSCOW. Sept 15 (Interfax) - The Russian Central Bank has raised its inflation forecast for 2023 to 6-7% from 5-6.5%, but expects it to return to approximately 4% next year, the CBR said in a press release.

The Central Bank's estimates as of September 11 show that annual inflation increased to 5.5% after hitting 4.3% in July and 5.2% in August. Current inflationary pressure has increased, partially due to the effect of the weakening ruble on prices. On average, over the past three months, seasonally adjusted price growth was 9% annualized. The same core inflation rate increased to 8.4%.

The Central Bank indicates that rising inflationary pressure is manifesting itself across an increasingly wide range of goods and services. The increase in domestic demand exceeds the ability to increase output. High domestic demand has been a significant factor in the weakening of the ruble due to an increased demand for imports.

"The transfer of the weakening ruble into prices is enhanced by increased inflation expectations. The price expectations of enterprises have increased especially strongly in recent months. The Inflation expectations of the population have also increased. These expectations from professional analysts for 2023 and 2024 have also increased, but for the medium term they are anchored around 4%," the press release said.

In these conditions, it is necessary to ensure the additional tightening of monetary conditions to limit the scale of inflation deviation upward from the target and return it to 4% in 2024.

According to the updated CBR forecast, annual inflation will be in the range of 6-7% by the end of 2023.

"The monetary policy pursued by the Bank of Russia will limit the scale of inflation deviation upward from the target. Taking into account the current monetary policy, annual inflation will return to 4% in 2024 and will be close to 4% in the future," the Central Bank expects.

The Central Bank also warned that the return of inflation to the target and its further stabilization in the 4% range also implies a long period of maintaining tight monetary conditions in the economy.