Inflation will gradually return to the target

In January, inflation slowed dramatically — to 2.4%. However, such dynamics in the beginning of the year was in line with expectations given the saving influence restraining the growth of prices temporary factors and also the exit of the calculation of inflation effect of the VAT increase and indexation of tariffs for communal services in January 2019. However, formed the preconditions for a gradual return of inflation to the target level of 4%. To such conclusion authors of the next edition of the newsletter “what do the trends” prepared by the Department of studies and forecasting of the Bank of Russia.

In December—January, annual inflation remained on a downward trend, approaching the reversal point. Despite the fact that short-term disinflationary risks still prevail over proinflationary, and the growth of prices among the components of the consumer basket of goods, which are most resistant to the influence of temporary factors, remains below trajectory, allowing inflation to 4% for the year, formed the preconditions for a gradual return of inflation to the target. On the background of the termination of restraining the growth of prices temporary factors and the observed signs of recovery in economic activity that will further contribute to the delayed effect adopted by the Bank of Russia of decisions on monetary policy.

The growth of the Russian economy accelerated in the second half of 2019 to levels close to potential. Leading indicators are also talking about maintaining these growth rates of the Russian economy in the coming quarters in the absence of new significant external shocks. In the past year, domestic demand has become the driver of economic growth, allowing to compensate for significant negative impact on the Russian GDP reduced the growth rate of the world economy. A stimulating fiscal policy and the past easing in monetary conditions will support domestic demand in 2020.

The conclusions and recommendations contained in the Bulletin may not necessarily reflect the official position of Bank of Russia.

12 Feb 2020