The RF Central Bank’s Monetary Policy Easing Cycle Is Probably Over

Following its board meeting on October 28, the Bank of Russia left the key rate unchanged at 7.5% per annum, which is in line with the analyst consensus forecast and financial market expectations. This decision was the result of a reversal in the inflationary trends, an increase in the inflationary expectations of individuals and businesses, and the proinflationary budget policy in 2022–2023. The Bank of Russia did not change its signal about the subsequent dynamics of the key rate. According to the month-end results for October, annual inflation slowed down to 12.6%, and the level of consumer prices climbed by 0.18%, which amounts to 1.5% in annualized terms when seasonally adjusted. According to our forecast, the year-end inflation index is expected to reach 12.1%, which is close to the lower bound of the Bank of Russia’s updated inflation forecast (12 13%). In 2023, annual inflation is projected to slow down to 5% in Q1, and then accelerate to 6.2% by the end of 2023