Inflation in Russia continues to grow contrary to the expectations of the Central Bank (CB). They explained that the matter, among other things, is the lack of free labor in the country with excess demand. To cope with inflation, the Bank of Russia decided to raise the key rate to 9.5%. The regulator warned that the move would not immediately alleviate the situation. The head of the Central Bank, Elvira Nabiullina, said that the regulator decided to significantly revise its views on the economic situation.

“Contrary to our expectations, there has been no turning point in inflation dynamics to date. Moreover, its stable components even increased.

The main reason is the growing imbalances in the economy. As a result, a tighter monetary policy is needed than we previously thought,” she explained.

Therefore, the Bank of Russia again raised the key rate - from 8.5% to 9.5% per annum. Nabiullina admitted that at the next meetings the Board of Directors of the Central Bank may continue to raise the rate. “It is quite possible that we will have to take steps of this level,” the expert noted. The Central Bank approves the key rate at regular meetings every six weeks.

The key rate is the minimum percentage at which commercial banks take loans from the Central Bank. That is, banks take money from the Central Bank at a wholesale price, and they are issued to customers at other, retail rates. Accordingly, the key rate directly affects the amount of interest at which banks issue loans and attract deposits. If the Central Bank raises the key rate, this can negatively affect business and ordinary citizens - it becomes too expensive to take out loans, business slows down its development, and consumer demand for goods decreases. However, at the same time, it helps to stabilize the economy in the country.

The head of the regulator indicated that one should not expect a noticeable drop in inflation after raising the key rate. According to her, the result will appear in a few quarters. The Central Bank expects the greatest effect in the second half of 2022 - early 2023.

Nabiullina believes that the increase in the key rate by the Central Bank is justified. Without it, inflation would rise even more.

“If we hadn’t started raising the rate last spring, inflation today would have been much higher than 10%,” Nabiullina emphasized.

The Bank of Russia believes that there will be no sharp acceleration of inflation. As Nabiullina noted, the peak of inflation was passed in October 2021. “If we talk about annual indicators, which take into account the rise in prices over the past 12 months, then we are somewhere at peak values ​​now. We do not expect any sharp acceleration. But so far there has not been a reversal so that we can say that there is a steady trend to slow down, ”summed up the head of the Central Bank.

It became known yesterday that inflation in Russia reached a six-year high in January. In annual terms, January inflation was 8.73% (a record for exactly six years, since January 2016). This is 0.34 percentage points more than the annual inflation in December. Monthly inflation in Russia in January amounted to 0.99% after 0.82% in December.

According to the forecast of the Central Bank, annual inflation will return to 4% in mid-2023. Nabiullina explained that when inflation is above 4%, it negatively affects "the economy, motivation for long-term investments, long-term savings."

According to the forecast of the Bank of Russia, taking into account the ongoing monetary policy, annual inflation will decrease to 5.0-6.0% in 2022 and return to the level of 4% in mid-2023. In the future, annual inflation will be close to 4%.

The head of the Central Bank pointed out that there is now excess demand in Russia. At the same time, production cannot satisfy him, because the country does not have enough free labor. This is what affects inflation.

“The shortage of labor is becoming an increasingly serious constraint on output growth. Unemployment is lower than ever, and it will be difficult for companies to recruit new workers as production expands,” Nabiullina said.

The Central Bank said that in the fourth quarter of 2021, the Russian economy "significantly deviated upward from the trajectory of balanced growth" - at the end of last year, GDP grew by 4.7%. This year growth is expected at the level of 2-3%.

“The Russian economy will return to a balanced growth path by the end of 2023 and will continue to develop at a pace consistent with its potential,” Nabiullina said.

Nabiullina stressed that in such a situation, the Russian economy would not be saved by the "distribution of cheap loans." It would only spur the already excessively high demand. But raising the key rate just can cope with it.

Reducing the key rate of the Central Bank, as Nabiullina pointed out, is likely to be slower than it was raised over the past year.Rusipoteka's chief expert, Sergey Gordeiko, said that due to the rise in the key rate in Russia, market mortgage rates may rise. According to him, average mortgage rates excluding preferential programs in March-April 2022 may reach 12%. “Then it will reach 13% with a slowdown,” the specialist added.

At best, according to Gordeiko, the situation may change in late summer or autumn.

“Like any medicine, raising the key rate has side effects, including raising mortgage rates and thus reducing the availability of mortgages”,

- confirmed the head of the Department of Mortgage Housing Lending and Financial Instruments of the Real Estate Market of the Financial University under the Government of Russia Alexander Tsyganov.

Commenting on the decision of the Bank of Russia, Maxim Stepochkin, head of the Savings department at VTB, said that the key rate in 2022 would not exceed 11%. In his opinion, the regulator will be able to cope with inflation.

“The growth of deposit rates will no longer be as sharp as last year,” the specialist summed up.

bbabo.Net