Central Bank of Russia expecting decline in inflationary pressure due to tight monetary policy, cooling in lending activity

MOSCOW. Dec 20 (Interfax) - Inflationary pressure will begin to decline in the coming months due to the impact of tight monetary policy and the cooling of lending activity, the Central Bank of Russia said in its press release issued following the meeting of its board of directors.

"In October-November, the current seasonally adjusted price growth averaged 11.1% in annualised terms after 11.3% in the previous quarter. Although volatile components make a considerable contribution to price changes, underlying inflationary pressures increased. Core inflation was up to an average of 10.9% in October-November after 7.6% in the previous quarter (seasonally adjusted annualised rate). This is associated with strong domestic demand recorded in recent quarters," the CBR said.

"In December, weekly data show that elevated inflationary pressures persist, which is also caused by the depreciation of the ruble. According to estimates as of 16 December, annual inflation went up to 9.5%," it said.

"Inflation expectations continue to rise, increasing the inertia of underlying inflation. Household inflation expectations and business price expectations increased in December," it said.

"Current price growth will remain elevated for some time due to the inertia caused by the accumulated effects of fiscal stimuli, high credit activity of previous months, and the pass-through of the ruble weakening to prices," the CBR said.

"Given the monetary policy stance, annual inflation will decline to 4.0% in 2026 and stay at the target further on," it said. The CBR did not disclose how its forecasts for inflation in 2024 and 2025 had changed.

At its meeting in October, the CBR's board of directors raised the forecast for inflation in 2024 from 6.5%-7% to 8%-8.5% and from 4%-4.5% to 4.5%-5% in 2025.