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CBR Statement Highlights System Stability, But Brewing Stagflationary Concerns

  • CBR Statement: Worth noting we have no policy changes here, just economic observations more than anything:
  • The Russian economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary but inevitable period of increased inflation.
  • Deposit rates are up significantly. This was instrumental in restoring the inflow of funds into fixed-term ruble deposits and stabilised household demand for cash.
  • Inflation:
    • Weekly estimates show that inflation has significantly accelerated since early March. Current price movements are largely driven by a surge in consumer demand for individual product categories against the background of higher uncertainty and rising inflation expectations, as well as the weakening of the ruble since the beginning of 2022.
    • Proinflationary risks have considerably increased and are now prevailing over the entire forecast horizon. In the short term, the effect of proinflationary factors is likely to be accentuated by high and unanchored inflation expectations. Over a longer horizon, the Russian economy faces considerable uncertainty regarding the speed and scale of the adjustment of aggregate supply in response to the recent increase in trade and financial restrictions.
  • Growth/Sentiment:
    • GDP will reduce over the coming quarters. This decline will be mainly driven by supply-side factors, thereby producing a limited disinflationary effect. The stimulus measures being adopted by the Government and the Bank of Russia will limit the scale of economic downturn.
    • Flash indicators, including the Bank of Russia’s business survey, suggest a deterioration of the situation in the Russian economy. A sharp surge in uncertainly weighs heavily on the sentiment and expectations of households and businesses. A considerable weakening in credit activity is expected in the coming months.
MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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