Evgeniy Goryunov, Head of the Monetary Policy Department at the Gaidar Institute spoke to Nezavisimaya Gazeta about the factors that will influence inflation in Russia and the Central Bank’s decisions on the key rate.
According to his assessment, inflation could approach 7% by the end of 2026; however, the main source of price pressure remains not infrastructure disruptions but rising utility rates and sustained domestic demand.
“In my view, the contribution of infrastructure disruptions to inflation is not the main factor. Much more significant factors are the rise in utility rates and persistently relatively high demand, as evidenced by trends in lending and the money supply,” noted Evgeny Goryunov.
According to the economist, the increase in utility rates affects prices and restrains a cut in the key rate, but does not in itself require a tightening of monetary policy. Such rate adjustments largely offset inflation that has already occurred, rather than reflecting expectations of future price acceleration.
Additional uncertainty stems from fiscal policy. If budget adjustments fail to curb the growth of government spending, aggregate demand will remain high and continue to put pressure on prices.
That said, the lasting inflationary consequences of the damage to infrastructure are not yet evident. However, the destruction of infrastructure hinders economic development and may reduce long-term output growth rates—the Central Bank cannot influence these processes through monetary policy instruments.