Russian Forecasts Said to Show Inflation Top Central Bank Target

  • Price growth won't slow to 4% for three years, documents show
  • Bank of Russia chief calls inflation aim `realistic' next year

Russian inflation won’t reach the central bank’s target until end-2019, two years later than planned by policy makers, according to a copy of Economy Ministry forecasts seen by Bloomberg News.

Consumer-price growth will end this year at 6.5 percent and then decelerate to 4.9 percent in 2017, 4.5 percent in 2018 and 4 percent in 2019, according to the ministry’s new baseline scenario, which was distributed before a government meeting on Thursday. The Bank of Russia’s 4 percent target is “realistic” for next year, Governor Elvira Nabiullina said on Wednesday.

The central bank overshot its target for price growth in 2015 for a fourth consecutive year and has previously conceded the index may “deviate” from its goal in late 2017 after turmoil in the oil market and the ruble. Nabiullina warned on Wednesday that after easing for seven months, inflation was at risk of stalling at 6 percent to 7 percent, a level she called “unacceptable” for speeding up the economy and spurring investment.

Under the ministry’s base-case, Urals oil will average $40 a barrel through 2019, according to the documents. At that level of crude prices, gross domestic product will return to growth next year after shrinking 0.2 percent in 2016. GDP is forecast to expand 0.8 percent in 2017 and accelerate to 1.8 percent the following year and 2.2 percent in 2019.

Rates, Inflation

With the economy in recession for a second year, the central bank has remained on pause after five interest-rate reductions in 2015 as inflation expectations remain high. While the annual index fell in March to 7.3 percent, its lowest in almost two years, prices had their biggest weekly advance since early March in the seven days through April 18. Annual inflation is currently running at 7.2 percent, according to Nabiullina.

“We shouldn’t lose vigilance,” Nabiullina said at the Finance Ministry’s annual meeting in Moscow on Wednesday. “Without low inflation, there will be no low long-term rates in the economy and no predictable conditions for running a business, which is critically necessary for economic growth,” she said.

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