Retail lending has risen, inflation is under pressure from a tough PREP: The Central Bank explained the decision on the key rate

© сгенерировано ИИ

According to the forecast of the Bank of Russia, the current monetary policy will reduce annual inflation to 4.0% in 2026 and will keep it at this level in the future.

In October and November prices rose by an average of 11.1% year-on-year, after 11.3% in the previous quarter. Although volatile components continue to affect prices, sustained inflationary pressures have intensified. Core inflation for October-November increased to 10.9% on average, after 7.6% in the previous quarter (seasonally adjusted and adjusted for the year). The Central Bank reports that this is due to high domestic demand in recent quarters. Weekly data for December show that inflationary pressures remain elevated, including due to the weakening of the ruble. As of December 16, annual inflationrose to 9.5%.

Inflation expectations continue to grow. In December, the expectations of the population and businesses for price increases increased. Analysts have raised their inflation forecasts for 2025&2026.

According to operational data, in October and November, the Russian economy grew at a pace close to the values of the third quarter of 2024. The main contribution to increased economic activity contributes to high domestic demand. The upward deviation of the Russian economy from balanced growth remains significant, as evidenced by high current inflationary pressures.

The labor market remains tough. Unemployment has again updated the historical minimum. Wage growth is outpacing productivity growth. At the same time, there is a decrease in demand for labor in certain industries and its flow to other sectors, which indicates a reduction in the shortage of labor resources. This trend is also confirmed by the decreasing number of vacancies.

Monetary conditions have tightened significantly. The Central Bank attributes this to the impact of tightening monetary policy and a number of autonomous factors, such as tightening macroprudential policy, planned normalization of banking regulation and increased requirements of banks to borrowers.

Since October interest rates have increased in various segments of the financial market. The increase in credit and deposit rates was significantly greater than after the October increase in the key rate.

In November, the growth of retail lendingalmost stopped, and the growth of corporate lending slowed significantly for the first time since the beginning of 2024.According to the Bank of Russia, the overall increase in lending by the end of 2025 may be near the lower limit of the October forecast range of 8-13%.

- In the medium term, the balance of risks for inflation remains significantly shifted towards pro-inflationary, although some disinflationary risks have increased. The main pro-inflationary risks are associated with the persistence of high inflation expectations, the upward deviation of the Russian economy from the trajectory of balanced growth and the deterioration of foreign trade conditions. Disinflationary risks are associated with a faster slowdown in credit growth and domestic demand under the influence of tightening monetary conditions, the Central Bank reports.