Uncertainty, difficulties, inflation. The main thing from the Central Bank report

Annual inflation in Russia may range from 18% to 23% by the end of 2022. The relevant forecast is included in the Central Bank’s report published on Wednesday, May 11 at 17:00. domain regulator.

“Annual inflation may rise in most months for the rest of the year,

By the end of 2022, the annual rate of increase in consumer prices will be in the range of 18-23%. The Central Bank of the Russian Federation believes that in 2023-2024, inflation will begin to slow down under the influence of disinflationary factors.

With the effect of the ongoing monetary policy, it is assumed that the annual rate of price increase will be in the range of 5-7% by the end of 2023 and will return to the target value of 4% by 2024. “Despite a significant change in the conditions for the implementation of monetary policy, inflation close to 4% remains the main target of the Central Bank of Russia.

The decision to raise the key rate to 20% on February 28 helped to slow the sharp rise in inflation and protect the economy from risks to financial stability.

In the future, the flexible nature of inflation targeting will allow the Bank of Russia to facilitate the adjustment of the Russian economy to the new conditions and lay the basis for the gradual return of inflation to the target.

Sanctions will continue

The Bank of Russia also believes that sanctions and restrictions on the export of Russian goods and their imports into the Russian Federation (including decisions taken by individual companies) will continue throughout the forecast horizon until 2024.

“General uncertainty and restrictions on Russian exports are likely to affect global commodity markets and keep prices high,” the report says.

In addition, according to the Central Bank, the main Russian exports will be sold at a discount, which will have a limiting effect on the value of the export of goods. As the regulator expects, commodity prices will gradually return to equilibrium levels. The long-term equilibrium price of Ural oil is estimated at $55 per barrel.

According to the Central Bank of Russia, restrictions on exports and imports, problems with payments and logistics will cause foreign trade volume to remain below historically normal levels.

At the same time, the Central Bank believes that the Russian economy will have largely passed the way to adapt to sanctions by mid-2023 – by this time “new sales markets will be created and the groundwork will be laid for the localization of production.”

At the same time, “strong shocks affecting core production processes” can lead to a larger and longer-lasting contraction of supply relative to demand.

“General uncertainty, difficulties in marketing exports and purchasing imports needed in production will lead to a marked decline in private investment,” the document says.

major difficulty

A significant decrease in foreign trade and opportunities for a subsequent increase in exports will cause the share of exports in the economy to remain below historical averages in the new balance. The regulator said the issue will focus more on production for the domestic market.

“The 2022 crisis is one of the most important challenges facing the Russian economy since the 1990s.

“The measures taken by the government of the Russian Federation and the Central Bank of Russia will support the structural transformation of the economy and the transition to new equilibrium trends,” he said.

In addition, lowering the key rate will help to structurally restructure the Russian economy without creating pro-inflationary risks.

“Today we see room to lower the key rate before the end of this year.

The current forecast range for the average key rate is 12.5–14% for this year, 9–11% for next year, and 6–8% for 2024. “The possibilities and timing of use of this space will depend on incoming information, developments in the situation and other changes in the risk balance,” said Central Bank Governor Elvira Nabiullina.

Recall, at the end of April, the Central Bank reduced the key rate to 14% per annum.

Reserves are running low…

As of May 1, 2022, the Russian Federation’s international reserves are $593,052 billion, which is 2.2% (or $13.357 billion) lower than the beginning of April, the Central Bank of Russia said in a statement.

after the start Special military operation in Ukraine Western countries imposed sanctions on the Central Bank of the Russian Federation. In addition to the freezing of Russian gold and foreign currency reserves, all transactions related to the management of reserves and assets of the Central Bank, as well as transactions with any legal person, organization or organization acting on or on behalf of the Central Bank, fell under the ban.

As Nabiullina previously reported, approximately $300 billion in gold and foreign exchange reserves of the Russian Federation were frozen.

British Foreign Secretary Liz Truss claimed that more than half of Russia’s reserves (60%, or about $350 billion) were frozen.

International reserves, which are highly liquid foreign assets held by the Bank of Russia and the government of the Russian Federation, consist of foreign exchange funds, special drawing rights, a reserve position at the IMF, and monetary gold.

… and the expense of the Russians is rising

Against this background, Russian spending continued to increase. as calculated “Romir”In the period of May 2 – May 8, the average weekly expenditure of Russians increased by 2.4% compared to the previous week.

The weekly expense index amounted to 5,265 rubles. In annual dynamics, Russian spending increased by 5.6%.

The average check index decreased by 0.9% compared to the previous week. The average cost of one purchase was 671 rubles. Compared to the same period of the previous year, the index shows an increase of 3.4%. Compared to the average value of the last 12 months (658 rubles), the weekly check is 2% higher.

While sanctions, payments and logistical problems push foreign trade volumes below historically normal levels, Russia’s main exports will be discounted. This is reported in the report of the Central Bank of Russia. The regulator cites a “general uncertainty” that will lead to a marked decline in private investment. The 2022 crisis is recognized by the Central Bank as one of the most important challenges facing the Russian economy since the 1990s.

Source: Gazeta


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