On September 13, 2024, the Bank of Russia Board of Directors decided to increase the key rate by 100 basis points to 19.00% per annum. Current inflationary pressures remain high. By the end of 2024, annual inflation is likely to exceed the July forecast range of 6.5–7.0%. Growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services. Further tightening of monetary policy is required to resume the disinflation process, reduce inflation expectations, and ensure the return of inflation to the target in 2025. The Bank of Russia holds open the prospect of increasing the key rate at its upcoming meeting. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 4.0–4.5% in 2025 and stay close to 4% further on.
In August, current seasonally adjusted price growth was 7.6% in annualized terms. The similar indicator of core inflation was 7.7% in annualized terms. These values were below the average levels of Q2 but exceeded the average values of Q1 in 2024. According to estimates as of September 9, annual inflation equaled 9.0% after reaching 9.1% at the end of August.
Inflation expectations among households and businesses continued to rise with analysts’ short-term expectations increasing as well; however, long-term expectations based on financial market instruments declined following July's decision on key rates.
GDP data for Q2 and high-frequency indicators from July-August show that Russian economic growth slowed slightly due mainly to supply-side constraints and softening external demand rather than a cooling domestic demand.
Consumer activity remains high despite some slowdown, supported primarily by rising household incomes and substantial investment demand backed by fiscal incentives and accumulated business funds over recent years.
The labor market remains tight with unemployment dropping to a new historical low while considerable labor shortages persist particularly in manufacturing sectors.
Monetary conditions tightened following both July's increase in key rates and an upward revision in its forecast path affecting money market rates as well as short- and medium-term OFZ yields while long-term OFZ yields declined due largely because lower financial market participants' inflation expectations.
High market interest rates have encouraged saving but have not sufficiently constrained lending yet overall lending growth remains high despite deceleration within retail segments particularly mortgage lending which slowed following termination non-targeted subsidized mortgage program from July first alongside rising market rates.
Over medium-term horizon balance inflation risks tilt significantly upwards with pro-inflationary risks associated deteriorating foreign trade conditions persisting alongside risks stemming persistently high expectations upward deviation Russian economy balanced growth path while disinflationary risks relate primarily faster-than-expected slowdown domestic demand growth baseline scenario
Bank assumes announced fiscal policy normalization path into next year onwards unchanged though changes may necessitate revisions monetary parameters
Summary Key Rate Discussion will be released September twenty-fifth next review meeting scheduled October twenty-fifth press release detailing decisions medium-term forecasts published thirteen-thirty Moscow time
Statement Governor Elvira Nabiullina follow-up Board Directors meeting September thirteenth reference Press Service mandatory use material
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