BOFIT Viikkokatsaus / BOFIT Weekly 2018/31

The press release from the Central Bank of Russia's July board meeting on interest rates reads largely like the June release. The CBR said that it is highly likely that its monetary policy stance will shift to neutral next year. The CBR has earlier determined that the neutral key rate level is 6–7 % and further specified that the level has risen closer to the upper bound of this range in recent months.

The CBR expects inflation to rise from its current rate of around 2.5 % to at least somewhere near its target rate of 4 % by the end of this year. In addition to the direct effects of forthcoming tax changes on inflation, uncertainty persists over the strength of their impact on inflation expectations. Expectations of slightly higher inflation are further supported e.g. by the likelihood of a smaller harvest than the bumper harvest of 2017.