The tightening of monetary policy is over – such a scenario is becoming the basic one for market participants, as follows from the analytical note by Citibank “When will the Bank of Russia begin to reduce the key rate?” (“Vedomosti” got acquainted with it). This conclusion can be drawn primarily from the July data on the growth of consumer prices, which show that inflationary pressures are falling, the study says. The Central Bank recorded a decrease in annual inflation in Russia in July 2021 by 0.04 percentage points to 6.46%. Rosstat previously reported a weekly deflation of 0.01% for the period from 10 to 16 August. This is the third price cut since the beginning of the year. Since the beginning of August, deflation has been 0.03%.
Although the slowdown in price growth is mainly due to the seasonal decline in the cost of fruit and vegetable products, there are several signs that inflation has already surpassed its peaks this year and will continue to decline in the future, Citibank analysts expect. At the moment, inflation in annual terms is 6.4%, by the end of 2021 the figure will drop to 5.7%, they predict. A slowdown in price growth and inflationary expectations will reduce the risks of excess demand over supply, which are included in the calculation of the Central Bank’s rate. By June 2022, the consumer price index will be 4.5%.
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