Russia’s inflation may hit about 12% in 2015, Economic Development Minister Alexei Ulyukayev said on Saturday.
“We proceed from the fact that inflation will be close to 12%, December on December,” he said.
Russia’s inflation will rise to an annual rate of 13.1% in January, he said, referring to the ministry’s estimates. At the same time, monthly inflation in January will exceed 2%, he added.
The Economic Development Ministry’s previous forecast published in December predicted inflation at 7.5% in 2015. The ministry later said inflation would hit double digits or about 10% in 2015. The ministry expects inflation to peak at 15-17% on an annual basis in March-April.
According to data provided by the State Statistics Service (Rosstat), Russia’s consumer prices have grown by 2.1% since the start of January. Weekly inflation slowed in January 20-26 to 0.6% from 0.7% in the previous week.
Russia’s GDP will contract by 3% in 2015 at an oil price of $50 per barrel, Economic Development Minister Alexei Ulyukayev said on Saturday.
The Economy Ministry’s revised forecast submitted to the government on Saturday is based on the current price dynamics, i.e. $50 per barrel as the average price for 2015, he said.
“While consensus forecasts show higher estimates, the Economic Development Ministry proceeds from the most conservative forecast,” he said.
“This means that GDP’s fall will be considerable, by about 3%,” he said.
The Bank of Russia’s decision to cut the key rate by 2 percentage points to 15% is justified, Economic Development Minister Alexei Ulyukayev said on Saturday.
“I consider yesterday’s decision by the Bank of Russia on the key rate and refinancing instruments to be justified and expedient,” Ulyukayev said.
The decision signals the understanding that risks posed to financial stability have decreased. The Central Bank’s December decision on the rate hike was primarily aimed at making the market stable, he added.
“On the other hand, I completely agree with the [central bank’s] estimate of a balance between inflationary risks and the risks of a slowing economy,” he said. “This [the rate cut] is an undoubtedly responsible and positive step,” Ulyukayev said.
Russia’s Central Bank has also achieved the goals of stabilizing the currency and financial markets, the economy minister said.
“Basically, these goals have been achieved and I believe that the situation is now predictable and market participants no longer have excessive inflationary and devaluation expectations,” he added.
The Central Bank of Russia made a decision at its policy meeting on Friday to cut its key one-week repo rate to 15% from 17%
“The rate cut by 2 percentage points gives a possibility to launch crediting of the real sector, which is one of the tasks of the [government’s] anti-crisis plan,” Central Bank Governor Elvira Nabiullina was quoted by the Central Bank’s press office as saying.
The Central Bank hiked the main lending rate to 17% from 10.5% on December 15 in a bid to stem the ruble’s slump amid falling world oil prices, western sanctions, a faltering economy and large capital flight.
The regulator’s move prompted interest rate increases in the Russian banking sector and actually made lending unaffordable both to businesses and households.
Central Bank Governor Nabiullina earlier said the regulator would be ready to lower the key rate if a steady trend emerged for lower inflationary and devaluation expectations.
The Russian Central Bank said in comments on its rate cut on Friday that its decision could be explained by “a shift in the balance of risks of accelerated consumer price growth and the economy’s cooling.”
The regulator’s decision to dramatically raise the key rate on December 15 “helped stabilize inflation and devaluation expectations to the extent expected by the regulator,” the comments said.
“The current upsurge in inflation is driven by the accelerated price adjustment to the weakened ruble and has a limited time effect. Inflationary pressure will be subsequently restrained by lower economic activity,” the regulator said in a statement.
Russia’s annual consumer price growth reached 13.1% as of January 26 but “the current monetary conditions are creating pre-requisites for the inflation decrease in the medium term,” the regulator said.