Elvira Nabiullina: Price growth in Russia remains moderate

The acceleration of price growth in January and the subsequent slowdown in February were largely determined by one-off factors. This was especially noticeable in the prices of electronics, building materials, furniture, and certain food products.

Against this background, the dynamics of prices for services stand out - since June last year, they have been growing noticeably faster than prices for goods. Accelerated growth in service prices is often interpreted as a sign of increasing persistent inflationary pressures in the economy, which requires a monetary policy response. This is due to the fact that these prices are less responsive to exchange rate dynamics and one-time factors in individual markets and are reviewed less frequently than commodity prices.

— But at the moment it is premature to draw an unambiguous conclusion that the rapid growth in prices for services means sustainable inflationary pressure. There are two components to the current rise in prices for services. The first is really the stable part. It is connected with the dynamics of wages, since the main share of the cost of services is the cost of labor resources. But the second component is catch-up growth. Since the middle of last year, we have seen a price adjustment for services after the pandemic and after a sharp increase in the level of prices for goods last spring. It is still difficult to assess in what proportion the current increase in prices for services is due to both components, - commented Elvira Nabiullina.

However, over time, the adjustment will be completed and the rate of growth in prices for services will be largely determined by stable factors, the Central Bank believes.

Inflationary expectations of the population in March significantly decreased. Elvira Nabiullina stressed that the respondents noted a slowdown in inflation, as well as improved expectations regarding the economic situation in the country and the prospects for personal financial situation. However, in general, the level of inflation expectations of both households and businesses remains elevated.