BOFIT Viikkokatsaus / BOFIT Weekly 2018/13

With the February 12‑month inflation reading unchanged at 2.2 %, the CBR board decided to cut the key rate to 7.25 %. It said that it now considers the low-inflation environment sustainable and evaluated that inflation expectations have continued to fall. If the current environment prevails, it stated it will continue cutting the rate this year until reaching the level that is neutral with respect to inflation (which according to the current CBR estimate is 6–7 %). At the end of this year, the central bank expects inflation to be at 3–4 %, or near the CBR's official 4 % target. From inflation risks, the CBR now brought up for the first time a concern related to the tightening of labour market that might lead wages to rise faster than productivity.