Growth of pro-inflationary risks requires more cautious approach to monetary policy decisions - Central Bank of Russia governor

MOSCOW. April 24 (Interfax) - The increase in pro-inflationary risks is associated with the conflict in the Middle East and possible changes in fiscal policy, which requires a more cautious approach from the Central Bank when making decisions on monetary policy, Central Bank of Russia Governor Elvira Nabiullina said.

"Economic activity is slowing down. Demand dynamics roughly correspond already to the economy's capacity to ramp up supply. However, inflation still exceeds the target so far. Measures of underlying price growth remain in the range of 4-5%. Moreover, proinflationary risks have risen considerably. They are attributable to the Middle East conflict and possible changes in fiscal policy. In these conditions, we need to follow a more cautious and prudent approach to making our decisions. Taking this into account, we have slightly raised the forecast of the average key rate to 14%-14.5% for this year and 8-10% for the next year," Nabiullina said at a press conference on Friday.

A reorientation of tourist flows has occurred due to the conflict in the Middle East, which has led to higher prices for services, she said. Additional pressure came from an increase in retail gasoline prices. "Although transitory factors significantly contribute to price dynamics, we scrutinise fundamental reasons in the first place, when analysing inflation. The key aspect is the balance between the economy's production capacities and demand dynamics. Although the gap between the said indicators has almost closed, underlying inflation still exceeds 4% as a result of the demand overheating that was observed over previous periods. It continues to translate into inflation expectations which remain elevated. Additionally, increased budget expenditures in early 2026 also exerted upward pressure," she said.