Inflation will remain high compared to 2023, yet likely below double digits, averaging 6.7% for 2024

Inflation is likely to ease in H2 as the high-base-year effects from late 2023 come into play and demand cools

Market participants should expect higher-for-longer interest rates, as inflationary pressures remain elevated. This will dampen consumption as living costs rise and private investment to some extent due to high credit costs. Nevertheless, the pace of inflation has shown an early sign of easing, with month-on-month inflation in March averaging 0.4% down from 0.7% in February 2024. Input prices for businesses will remain high, yet the pace of cost inflation is slowing. Businesses have also noted that the rate at which they pass on high input costs to customers eased in March.


  • On April 10, Bank of Russia Chair Elvira Nabiullina delivered her annual speech on the Bank of Russia’s 2023 Report to the State Duma. 
  • Nabiullina faces the challenging task of justifying the continuation of a tight monetary policy in the face of persistently high inflation and high budget spending. In March, annual inflation rose slightly to 7.72%, compared to 7.69% in February, despite the presence of high interest rates.
  • Nabiullina said that a lot of businesses are planning to expand production this year, countering claims that high interest rates are hindering their growth. She emphasized that despite high interest rates, corporate lending increased by 20% over the course of the year.
  • The chair also acknowledged that lending would moderate further, albeit from record-high levels observed in 2023, and anticipates that this moderation will exert a dampening impact on inflation.
  • High interest rates encouraged savings. In the last five months of 2023, household deposits increased by RUB 5.3 trillion, marking record growth rates. The inflow of funds into saving accounts continued in Q1 2024.

Our View

We anticipate the central bank will keep the policy rate unchanged during the upcoming April meeting, given the persistently high inflation. Our assessment suggests that any potential policy rate cuts may not occur until H2, and even then, they are likely to be minimal and gradual, which is aligned with the central bank’s cautious approach.

Overall, we expect inflation to remain high compared to 2023, yet likely below double digits, averaging 6.7% for 2024. Nevertheless, inflation risks will remain tilted to upside due to geopolitical uncertainties stemming from sanctions and the future trajectory of the war that necessitates high budget spending. Intensive drone attacks on oil refineries in Russia and missile strikes on border areas such as the Belgorod region, a significant supplier of pork and poultry meat, may exert upward pressure on petrol and agriculture product prices due to potential shortages. Another large-scale mobilization wave will increase wage pressures, yet Russian President Vladimir Putin will seek to delay this decision to the greatest extent possible and continue to rely on contractors in the short term. Our downside growth scenario sees inflation to average 10% YOY for 2024. 

Speculations regarding Nabiullina’s potential dismissal poses a looming uncertainty. While she has effectively led the monetary policy and steered it away from economic turmoil given an unprecedented number of sanctions, political considerations, including the widespread belief that she opposes the war, may cast a shadow over her achievements. Any decision regarding her future role holds the potential for significant implications on market stability and investor confidence. In our view, Putin tends to delegate economic management to professionals, refraining from excessive interference. Thus far, his economic management team has demonstrated markedly superior performance compared to his military generals, underscoring the importance of retaining Nabiullina’s job.

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