Russian economy re-entered overheating zone in Q3 2026, monetary policy must restrain domestic demand - Central Bank
MOSCOW. Nov 5 (Interfax) - The Russian economy re-entered the zone of a positive output gap (overheating) in Q3 2026, so it is necessary to maintain the restraining effect of monetary policy on domestic demand, according to the Central Bank of Russia's summary of the key rate discussion.
The rate was kept at 14% on October 23.
"Following the discussion, the participants concluded that the economy again moved to a positive output gap in Q3 2026. Domestic demand continued to grow, while in certain industries supply capacity was temporarily limited. Growing persistent inflationary pressure testified to the emergence of an imbalance between demand and supply. Model estimates also pointed to this," the summary says.
"The economy's return to a positive output gap. In Q3 2026, domestic demand continued to grow, while a temporary reduction in production capacity limited supply. Under these conditions, to gradually close the positive output gap, it is necessary to maintain the restraining effect of monetary policy on domestic demand," the summary says.
In its commentary on the medium-term forecast, the Central Bank said that Russia's GDP growth rate in 2026 will be 0.5%-1.0%, with the lower bound of the range raised by 0.5 percentage points or pp (from 0.0%-1.0% in the previous July forecast) "given somewhat higher growth in domestic demand in the second half of 2026 than previously assumed."
"According to the Central Bank's estimate, GDP dynamics (+1.0% year-on-year) were higher in Q3 2026 than the previous forecast (+0.5% YoY). Operational data point to continued economic growth in Q4 2026," the forecast commentary says.
At the same time, the forecast range for 2027 has been lowered by 0.5 pp to 1.0%-2.0% GDP growth given tighter monetary conditions. "Subsequently [starting from 2028], GDP growth will correspond to the long-term growth rates of potential output: 1.5%-2.5%," the Central Bank said.
The forecast summary also notes that pro-inflationary risks include, among others, a growing imbalance between demand and supply. "Domestic demand may remain elevated under the influence of persistently high lending growth rates and significant fiscal stimulus. A prolonged lag of labor productivity growth behind wage dynamics may further support inflationary pressure. At the same time, a longer recovery of production capacity in certain industries may further constrain the possibilities for expanding supply. As a result, the positive output gap may persist longer, intensifying inflationary pressure," the Central Bank said.
