Page 102 - RusRPTSept21

July.
The central bank sees the recent acceleration in inflation mainly due to a faster-than-expected recovery in domestic demand, which supply has not been able to meet. It estimates that the Russian economy has already reached its pre-crisis level in the second quarter of the year. At the same time, unemployment has fallen and there is even a shortage of labor in some sectors, which has increased upward pressure on wages. Inflation has also been partly accelerated by temporary factors. For example, the prices of domestic tourism services have risen sharply in recent months as demand has increased and foreign tourism has been restricted due to the pandemic.
In the light of recent developments, the central bank also raised its GDP and inflation forecasts for this year in July. GDP is now projected to grow by 4–4.5% this year and 2–3% in 2022–2023. Inflation is expected by the central bank to be 5.7–6.2% this year and to slow to 4–4.5% next year.
Regarding the monetary policy outlook, Governor Nabiullina noted that the central bank's current estimate is that the key interest rate will average 6-7% next year. Thereafter, the interest rate gradually falls to 5-6%, which the central bank sees as being in line with the 4% inflation target in the longer term. However, the central bank intends to start reviewing its monetary policy strategy in the autumn, which will assess e.g. whether the inflation target should be lowered.
102 RUSSIA Country Report September 2021 www.intellinews.com