Monetary Policy and Inflation in Early 2023[Денежно-Кредитная Политика И Инфляция В Начале 2023 Г]

The Bank of Russia has left the key rate unchanged at 7.5% per annum at the meeting on February 10, which coincided with the consensus forecast of analysts and expectations of the financial market. However, the Central Bank tightened the signal on further dynamics of the key rate as compared to the previous press-release, indicating that in case of strengthening of pro-inflation risks it will evaluate the expediency of the rate increase at the nearest meetings. The range of the regulator’s average expected value of the key rate in 2023–2024 was also raised by 0.5 p.p. The decision is conditioned by intensification of the inflationary pressure, growth of budget expenditures and deterioration of terms of foreign trade. As of the end of January, the annual inflation rate (over the last 12 months) continued to slow down and amounted to 11.7%. However, consumer prices rose by 0.84% in January, which seasonally adjusted stands at 6.1% in annualized terms and significantly exceeds the average level of annualized inflation for Q4 2022. According to our forecast, by the end of 2023 inflation will stand at 6.6% year-on-year (YoY), which is close to the upper bound of the forecast of inflation of the Bank of Russia (5–7%).