MOSCOW, Jun 11 (PRIME) -- The board of directors of the Russian central bank has raised the key rate by 0.5 percentage points to 5.5% annually, according to a statement seen by PRIME on Friday.
"The Russian and the global economy are recovering faster than expected. Inflation has been higher than the forecast of the Central Bank of Russia. Contribution of stable factors to inflation has been growing due to a faster increase of demand compared with supply growth opportunities. This effect has been strengthened by rising prices on the global commodities markets in the short term. Taking into account high inflation expectations, the balance of risks was significantly tipped towards pro-inflation," the authority said.
Annual inflation increased by 6% in May after 5.5% in April and reached 6.15% as of Monday. The figures reflecting the most stable price processes overshoot significantly the central bank's 4% target in May. The monthly seasonally adjusted consumer price growth accelerated significantly in the period.
The central bank expects inflation to return to 4% in July–December 2022.
Households’ inflationary expectations were close to 4-year highs, inflation expectations of companies were higher than local maximums for 2019–2020. Professional analysts put their expectations near 4% in the medium term.
Economic activity is recovering faster than expected. Consumer and investment demand increase sustainably and consumer activity has in general reached the pre-pandemic level. The household service sector is recovering actively and production has exceeded the pre-crisis levels in most branches, workforce demand is rising in a wide sphere of industries. Foreign demand is recovering.
In these conditions, the authority expects the local economy to return to the pre-crisis level until July. A decline in households’ tendency to save will support consumer demand, as well as higher earnings and debt.
At the same time, a faster than expected decrease of tendency to save can trigger inflation. The remaining difficulties in production and logistic chains can contribute to the increase. The global commodities market situation can add to inflation. The global markets can be volatile due a faster economic recovery and the need to finish unpreceded support measures.
Disinflation risks remain moderate and are connected with border opening, low vaccination rates and the spread of new strains of the virus.
The central bank still sees its monetary policies as mild and schedules the next meeting for July 23.
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