The Central Bank announced the need for longer tight monetary conditions
Against the backdrop of the acceleration of annual inflation in May to 8.3 percent from 7.84 percent in April, maintaining tight monetary conditions in order to further reduce price growth will have to be maintained for a longer time than previously predicted. This assessment in its May review of consumer price dynamics shared Bank of Russia.
“The increase in prices for stable components of inflation accelerated compared to April, in some indicators exceeding the rate of the fourth quarter of 2023,” the regulator says in its materials. It also notes that the current growth of the Russian Consumer Price Index (CPI) in May almost returned to the pace of the third quarter of 2023.
In May, Vedomosti, citing a source close to the Central Bank, wrote that the peak of overheating of the Russian economy was passed in the second half of last year, and the observed high growth in the country’s GDP may also be associated with the expansion of the economy’s potential. However, against the backdrop of the decision to maintain the key rate at 16 percent with the possibility of further increases, the head of the Central Bank, Elvira Nabiullina, said on June 7 that in the first quarter of 2024, the overheating of the Russian economy at least did not decrease.
This month, Russians’ inflation expectations continued to grow – adding 0.2 percentage points, they reached the highest level since February of 11.9 percent. The indicator is one of the main factors when deciding on the key rate. The higher the expectations, the stronger the desire to spend money now, which pushes inflation up.
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