Bank of Russia: Inflation expectations of households and businesses remained elevated in January

The consumer sentiment index (CSI) in January exceeded the local highs of July-September 2022 and reached its maximum value since May 2018. Survey participants increased their assessments of both the current state and expectations included in the IIT, however, part of the January increase can be explained by the influence of seasonality.

In January, the price expectations of enterprises participating in the Bank of RUSSIA monitoring decreased after four months of growth, but remained at an elevated level. Price expectations take into account the already existing pass-through of increased costs into prices. The average growth rate of selling prices expected by enterprises in the next three months amounted to 6.3% in annual terms.

According to the December macroeconomic survey of the Bank of Russia, analysts' forecast for inflation at the end of 2023 amounted to 5.8% (-0.2 percentage points compared to October, the survey was not conducted in November). Inflation forecasts for 2024 and 2025 were unchanged and remained close to 4%.

According to the Bank of Russia, over the medium term, the balance of risks is shifted towards pro-inflationary ones. In the short term, pro-inflationary risks have grown and also prevail over disinflationary ones. According to the forecast of the Bank of Russia, taking into account the ongoing monetary policy, inflation will decrease to 5-7% in 2023 and return to 4% in 2024.