OREANDA-NEWS  In the medium term, the balance of risks for inflation remains shifted towards pro-inflationary ones, the Bank of Russia believes. This is stated in the Central Bank's commentary on the decision to raise the rate to 18%.

The Central Bank associates the main pro-inflationary risks "with changes in the terms of foreign trade (including under the influence of geopolitical tensions), with the preservation of high inflation expectations and deviations of the Russian economy upward from the trajectory of balanced growth." Disinflationary risks, first of all, according to the Central Bank, are associated with a faster slowdown in domestic demand growth than expected in the baseline scenario.

In the second quarter of 2024, the Central Bank estimated a seasonally adjusted price increase of an average of 8.6% year-on-year, after 5.8% in the previous quarter. "In recent months, one-time factors have partly contributed to the acceleration of inflation. At the same time, sustained inflationary pressures have also increased. The seasonally adjusted core inflation rate in the second quarter of 2024 increased to an average of 9.2% year-on-year after 6.8% in the previous quarter. Annual inflation increased from 8.6% in June to 9.0%, as estimated on July 22. This growth reflects, among other things, the indexation of utility tariffs from July 1," the commentary says.

The Bank of Russia also noted the continued growth of inflation expectations of the population and financial market participants. The price expectations of enterprises as a whole have not changed, but remain high. Increased inflation expectations increase the inertia of sustained inflation, the regulator notes.

The Central Bank raised its inflation forecast for 2024 to 6.5-7.5% from 4.3-4.8%.