The Central Bank raised the inflation forecast for the current year to 7.4-7.9%

AK&M 22 October 2021 14:55

The Central Bank raised the inflation forecast for 2021 to 7.4-7.9%. Annual inflation increased to 7.4% (after 6.7% in August) and increased to 7.8% on October 18. This is stated in the message of the Bank of Russia following the meeting of the Board of Directors, which raised the key rate by 75 bps to 7.5% per annum.

The regulator believes that the prevailing influence of pro-inflationary factors may lead to a more significant and prolonged deviation of inflation upward from the target.

In October, inflation expectations of the population increased again and reached the highest values in the last five years. The latest data also indicate an increase in the price expectations of enterprises. Their expectations still remain near multi-year highs.

The Central Bank links the acceleration of inflation since the second half of August with the increase in prices for fruit and vegetable products. But the indicators reflecting the most stable processes of price dynamics, according to the estimates of the Bank of Russia, continue to be significantly higher than 4% in annual terms.

This is a reflection of the fact that the steady growth of domestic demand is outpacing the possibilities of expanding production in a wide range of industries. Against this background, it is easier for enterprises to transfer increased costs to prices, including those associated with rising prices on world markets, the Central Bank emphasizes.

At the same time, the effect of one-time pro-inflationary factors on the supply side translates into price increases for a wider range of goods and services due to high and unshored inflationary expectations of the population and business.