RUSSIALINK: “IMF projects below-target inflation in Russia, recommends policy easing in coming months” – Interfax

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MOSCOW. Nov 24 (Interfax) – The acceleration of inflation in Russia in recent months was a temporary occurrence brought about mainly by a weakening ruble; consumer price growth will be below target from now on and the Central Bank should lower its key rate in the coming months, the International Monetary Fund (IMF) said in the Staff Concluding Statement of the 2020 Article IV Mission.

“We project below-target inflation for some time and hence recommend policy easing in the coming months,” the IMF said.

“In our baseline, we project inflation at 3-3.5% in the second half of next year. Consistent with this, while there remains considerable uncertainty about the assumptions underpinning the baseline, we see significant economic slack persisting under most assumptions. In addition, while we take note of the increase in household inflation expectations, we worry that market-based measures of expectations are below 4%,” the IMF said.

“This argues in our view for policy easing in the coming months to keep inflation at target and preserve room to respond to future shocks. At the same time, we acknowledge that some risks outside the control of the central bank could trigger inflationary pressures if they materialize. But we view the materialization or not of these events as largely independent of Bank of Russia policy rate levels, and they could be addressed if and when they occur with a range of policy adjustments,” it said.

Annual inflation in Russia quickened to 4.2% as of November 16, from 4% at the end of October, according to the Russian Federal State Statistics Service (Rosstat). This is more than the upper limit of the CBR’s 3.9%-4.2% forecast range. The key rate is currently 4.25% per annum.