The Central Bank allowed a steady rise in inflation in case of simultaneous realization of pro-inflationary risks

The exchange rate from a disinflationary factor in the second half of 2022 in 2023 may become pro-inflationary, analysts of the Central Bank believe. “However, the current level of the exchange rate does not imply a significant pass-through effect to prices, since in general it is in line with the exchange rate expectations of companies, and also due to the fact that external economic costs are gradually decreasing in a number of areas as new logistics supply chains for imported goods are built,” emphasizes in the document.

Another pro-inflationary factor, according to experts, is the budget policy, which implies a more significant contribution of state demand to aggregate demand than was envisaged in the fall of 2022 when forming budget parameters for 2023-2025.

In January and, according to operational data, in February, seasonally adjusted consumer price growth exceeded 4% on an annualized basis. “First of all, this is due to one-time pro-inflationary factors, however, pro-inflationary factors of a sustainable nature are gradually increasing. If they continue to strengthen, a tighter monetary policy may be required to return inflation to the target in 2024,” the Central Bank department notes.

Demand, supported by government spending and active credit expansion, is increasing in the economy. At the same time, in general, the supply of goods and services may be constrained by ongoing logistical and foreign economic restrictions, analysts emphasize. In such a situation, in market segments with limited supply elasticity, some increase in price growth rates is possible.