In April-June the disinflation trend unfolded, not least because of volatile and one-off factors. However, underlying inflationary pressures in the economy were up as well, although not considerably. Household and business inflation expectations rose, the Central Bank of Russia (CBR) said in its latest “Talking Trends” economic bulletin.
Banks raised interest rates, which was because the Bank of Russia had tightened its monetary policy signals, among other reasons. Nevertheless, demand continued to expand in 2024 Q2 at a pace exceeding the economy’s capacity, while economic and credit activity was high. To bring inflation down to the target and return the economy to a balanced growth path, monetary conditions should be tighter in 2024 H2 than in 2024 H1.
Moreover, they should remain tight for an extended period.
Difficulties with importers’ cross-border payments entail pro-inflationary risks, and their impact is stronger than the disinflationary effect of the earlier ruble appreciation.
In focus, the labour market is intensifying pro-inflationary risks.