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A further increase in inflation expectations of the population and business may create pro-inflationary risks; limiting them and returning inflation to the target requires long-term maintenance of tight monetary conditions, the Central Bank of the Russian Federation said in a commentary.

Inflation expectations of the population and business in June, although they increased slightly, remain below the levels of the 4th quarter of 2023, the Bank of Russia notes.

It was previously reported that inflation expectations of the Russian population in June, according to an InFOM survey, increased to 11.9% from 11.7% in May. Price expectations of Russian enterprises resumed growth in June after a pause in May, returning to the values ​​of the 3rd quarter of 2023.

Annual inflation, according to the Bank of Russia's forecast, will return to target in 2025 and will remain close to 4% thereafter. “A necessary condition for the return of inflation to the target level is a reduction in inflation expectations. According to the forecast of the Bank of Russia, the ongoing monetary policy will limit the excessive expansion of domestic demand and its pro-inflationary consequences. To reduce inflation, a significantly longer period of maintaining tight monetary conditions in the economy will be required, than predicted in April,” the Central Bank emphasizes.