Secondary effects of increased VAT could turn out lower; trend in inflation expectations encourages cautious optimism - Central Bank of Russia

IRKUTSK. Feb 25 (Interfax) - The trend in inflation expectations indicates that the secondary effect of the increase in VAT could turn out to be lower than expected, economic advisor of the Central Bank of Russia monetary policy department Zoya Kuzmina told reporters in Irkutsk.

"VAT is ultimately a one-off, isolated factor which had its effect and then went away. We are paying very close attention to whether it will exert secondary effects on inflation expectations. For now, the signals should likely be assessed with some caution. Not negatively for inflation expectation trends, let's say," she said.

Kuzmina noted that household inflation expectations remained stable, while company expectations declined significantly in February, giving rise to cautious optimism that secondary effects may not be as severe.

"What's more important to us is how stable inflation has changed, and how inflation expectations have changed. Nothing negatively affected this. Everything was in line with our expectations. This made it possible to lower the rate at the February meeting and send a moderately soft signal that further reductions are also possible. However, we would still prefer to talk about the final effect, including down to tenths of a percentage point, when the first construction period has completed," Kuzmina said.

As previously reported, inflation expectations of the Russian population declined from 13.7% to 13.1% in February 2026, thus returning to the level of April 2025. Russian enterprises' price expectations declined in February after rising in January 2026 amid the VAT increase, approaching the 2025 average.