Gaidar Institute experts forecast inflation in Russia to slow down to 8% by the end of the year

«Tight monetary policy combined with normalization of the situation on the labor market and stable ruble exchange rate will gradually ensure credit cooling, stabilization of demand growth rates and inflation slowdown with moderate GDP growth rates of 1–2%. <…> We expect consumer price growth in Russia to accelerate to 9.95–9.98% year-on-year in Q1-Q2 of this year. However, as the effects of tighter monetary conditions, slower wage growth and consumer lending accumulate, we forecast a slowdown in annual inflation to 9.2% in Q3 and 8% in Q4 2025», the study concludes.

Experts note that operational data for 10 days of February indicate the persistence of increased price pressure. Analysts call the key factor of increased inflation the persistent excess of demand over supply.

«Real GDP growth in Q4 2024 of 3.8% year-on-year (seasonally adjusted and annualized Q4 GDP growth also rose by 3.8%), we estimate, led to an increase in the output gap by 0.7 p.p. (to 1.8%), which was one of the reasons for persistently high inflationary pressures in the fall and winter months of 2024," the study points out.

According to experts, the slowdown in inflation in late 2024-early 2025 was hampered by the acceleration of growth in budget expenditures and expansion of the budget deficit. As a result, consumer demand remained high, despite the cooling of retail lending and high savings rate, and the slowdown in the growth of money supply was suspended. At the same time, analysts believe that the credit cooling could be temporary, as it is associated not only with the impact of tight monetary policy on demand, but also with the traditional growth of budget expenditures and early advance funding of government contracts.