The Central Bank announced a reduction in the key rate to 5.5%
According to the regulator, "the situation has changed dramatically since the meeting of the Board of Directors in March. To combat the coronavirus pandemic, significant restrictive measures have been introduced both in the world and in Russia, which negatively affects economic activity. This creates a significant and prolonged disinflationary impact on price dynamics from the side of aggregate demand, which compensates for the effects of temporary pro-inflationary factors, including those associated with the fall in the oil price. At the same time the situation in global financial markets has stabilized after a period of particularly high volatility in March".
The Bank of Russia has revised the baseline forecast scenario and is moving into the area of soft monetary policy. According to the forecast of the Bank of Russia, taking into account the current monetary policy, annual inflation will be 3.8-4.8% by the end of 2020 and will stabilize near 4% in the future.
The Central Bank is confident that the weakening of demand will become a significant inflationary factor, which is due to the current and delayed economic effects of the restrictions imposed to combat the coronavirus pandemic in Russia and in the world. Inflation expectations of the population and business have increased, but in the conditions of reduced demand, their change will be short-term.
Data on the dynamics of inflation in March and April reflect the temporary reaction of consumer prices to the weakening of the ruble and episodes of increased demand for certain groups of goods. Annual inflation increased to 2.5% in March (from 2.3% in February). According to preliminary data for April 20, the annual growth rate of consumer prices was about 3.1%, according to the report of the Central Bank.
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