Russian Central Bank Expects Inflation to Reach Target Level This Year

The Russian central bank’s target inflation rate of four percent could be reached in the second half of 2018, the Bank of Russia said on Wednesday, according to Reuters.

In a monthly report on inflation, the central bank said inflation will pick up later this year from the 2.2 percent seen in January as the regulator continues cutting rates.

Muted demand in the economy and declining inflation expectations have helped anchor inflation at low levels, the central bank said in a statement. By the end of the year, inflation is seen slightly below four percent, the statement read.

The start of 2018 saw another reduction in the interest rate set by the Central Bank of Russia, amid lackluster inflationary pressures.

Following stronger growth since late-2016, momentum in consumer demand has subsequently eased. Struggles to lift demand conditions from their low base have meanwhile coincided with a decline in inflationary pressures, suggesting further policy stimulus is on the cards.

To encourage greater borrowing and spending among Russian consumers, the Bank of Russia began cutting its key interest rate from 17% in early-2015. It is widely expected that further cuts will be made to the current rate of 7.5% throughout 2018, with another rate reduction expected in the coming months.

At just 2.2%, the latest consumer price inflation rate has fallen well below the central bank’s target of 4% and represents one of the lowest levels of inflation in the post-Soviet era. Moreover, the deceleration has been fast, with the rate of inflation declining from 16.9% in just under three years.