Delayed impact: inflation will start to decrease only by autumn
Inflation will begin to decline steadily no earlier than the autumn of 2025, according to the Izvestia consensus forecast. The experts surveyed are not as positive as the Central Bank in its latest review before the "week of silence": the Bank of Russia reports that price growth has already begun to slow down, but so far it is an unstable process. Inflation, which has exceeded 10%, is being pressured by sanctions and the complication of financial and logistical flows, a shortage of personnel, which forces salaries to rise, and the high cost of vegetables due to the poor harvest last year. But there are also positive developments.: the strengthening of the domestic monetary unit — up to 85 rubles per $ 1 — and the regulation of fuel prices. When positive factors overpower negative ones — in the Izvestia article.
When will inflation in the Russian Federation begin to decline
A steady decline in inflation in Russia will begin only in the second half of 2025, according to six out of ten experts from banks and universities surveyed by Izvestia. The rest expressed a more optimistic forecast: two believe that price growth will begin to slow down in April-May, and two more believe that the process has already begun.
The Central Bank also sees the situation more positively. In one of the latest reviews that the regulator released before the "week of silence" on the eve of the key rate meeting, its analysts stressed that there are already signs indicating a slowdown in price growth, but the sustainability of this process is still questionable.
"To confirm the stability of the disinflationary trend <...> a more restrained growth in consumer activity is required, as well as faster growth in labor productivity relative to real wages," according to the bulletin "What trends say", which the regulator published on March 11.
However, it is too early to talk about a reversal of the upward trend, said the head of the Central Bank, Elvira Nabiullina. According to her expectations, annual inflation will peak in April-May, and by the end of 2025 it will be at the level of 7-8%.
Meanwhile, by the end of February, the price increase exceeded 10% (compared to February 2024).
Chairman of the Central Bank of the Russian Federation Elvira Nabiullina
— Despite, at first glance, the threatening double-digit figure, in monthly terms, price growth has been slowing for the third month. However, weekly inflation is often unstable. For example, prices for fruit and vegetable products are rising at the beginning of the year, as well as the cost of services is rising, and excise taxes on certain types of goods are increasing," said Natalia Milchakova, a leading analyst at Freedom Finance Global.
Why is price growth not slowing down in Russia
Currently, price increases continue to be accelerated by external restrictions — the supply of goods is becoming more expensive, as logistics costs increase. Another round of trade wars between China and the United States, which are expressed in the introduction of mutual tariffs on the supply of products, may also become a new trigger.
Fiscal policy is one of the internal pro-inflationary risks, said Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam. The slowdown in price growth is being held back by treasury spending - the more a country spends, the more money there is in the economy. This accelerates prices.
In addition, the weather conditions in 2024 had a negative impact: due to the cold spring and dry summer, a lot of crops were lost. According to the most recent data from Rosstat, the gross grain harvest in 2024 amounted to almost 126 million tons, which is almost 15% less than in 2023.
In addition, the extremely scarce labor market does not slow down inflation, and the situation with a shortage of workers will not improve until the end of the year, Mikhail Vasiliev, chief analyst at Sovcombank, is confident. According to the latest data, unemployment is at a record low of 2.3%, and it will not exceed 3% by the end of 2025.
What can slow down inflation in 2025
However, there are also positive factors. The strengthening of the ruble exchange rate is now helping to reduce inflation, Olga Belenkaya noted. According to the Central Bank, since the beginning of the year, the Russian national currency has strengthened by 15% — on March 12, it was at the level of $86.5 rubles per $1. This happened against the background of positive news about negotiations on the Ukrainian conflict and the establishment of a dialogue between the Russian authorities and the American ones.
Natalia Milchakova is sure that another positive factor that can prevent the unwinding of the inflationary spiral is the actions of the authorities to restore the damper on gasoline and diesel fuel in full. This is the mechanism that regulates its prices. Last year, the authorities placed bets on a ban on the export of petroleum products, but the cost of gasoline still increased by 11%. The damper is a more effective mechanism, the expert believes.
In addition, thanks to high rates, people are finally changing their consumption patterns.: They prefer to save more, borrow less, and spend less. As a result, inflation expectations are cooling.
All this will reduce inflation, but it will take time for positive factors to take effect — this should happen by the autumn of 2025. The majority of experts interviewed by Izvestia are confident that by the end of this year, prices will increase by about 8-9% (compared with 9.5% in 2024). And by the end of 2026, under good conditions, it may approach the target 4.5–5%.
When will the Central Bank start reducing the key rate
The key level of 21%, which the regulator has maintained twice in a row, is necessary to achieve the 4% inflation target, Elvira Nabiullina said on February 27 at the annual meeting with the Central Bank's leadership organized by the Association of Banks of Russia.
The central bank will attempt to lower the rate, but this will not happen until the summer, Olga Lebedinskaya, Associate Professor of Statistics at the Plekhanov Russian University of Economics, is sure. That is, it is highly likely that the key will remain unchanged in March.
The Central Bank's rate helps keep prices down, but at this level, raising it would no longer yield significant results. Currently, the main effective method of combating inflation is the development of a supply-side economy model, independent expert Andrei Barkhota believes. We are talking about a sharp increase in the output of most types of products to saturate commodity markets. He added: an important element in the implementation of this plan would be the lifting of sanctions and the entry of relatively affordable imports into the Russian market.
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