The Bank of Russia published an informational commentary “Dynamics of consumer prices”, in which it spoke about the prospects for inflation given the current noticeable weakening of the ruble and the reasons that will affect the rise in prices in the domestic economy in the foreseeable future.
According to the doc,
In the near future, the weakening ruble may exert upward pressure on prices. At the same time, restrained demand is likely to have a disinflationary effect, - the document says.
This means that with the current fall in the ruble, inflation growth will be constrained by lower demand: citizens can make fewer purchases due to coronavirus restrictions. The regulator expects that the dynamics of consumer prices will continue to depend on restrictive measures. First of all, this may affect the service sector, the Bank of Russia believes.
The regulator predicts that with the current monetary policy, annual inflation in Russia will exceed the “sought” 4% and may reach 4.2%. In the future, the Central Bank expects inflation to fluctuate around 4%.
As chernayakobra.ru reported, despite the recognition that the annual inflation in Russia could reach 4.2%, the Central Bank previously kept the inflation target in 2020 at 4%. Note that the sharp drop in the ruble exchange rate has already led to the flight of investors from ruble assets.
If the Bank of Russia was previously in no hurry to take any decisive action, now the regulator is increasingly entering the domestic market with record volumes of currency, which are used to buy up cheaper rubles to support the national currency. Intensified sales of foreign currency in the domestic market began on October 1; funds raised by the Bank of Russia from the sale of Sberbank to the government will partly go for this purpose.