All these factors might be the reason for a slower exhaustion of temporary factors and a slower reduction in inflation than assumed in the baseline scenario. Speaking of demand, accommodative monetary conditions existing in the global economy since the outbreak of the pandemic might remain for a longer period, despite the growing trend towards monetary policy normalisation in advanced economies. In the long run, monetary policy tightening in advanced economies will certainly have disinflationary impact. However, in the short run, global inflation may stay high longer, given the time lags of monetary policy. A faster monetary policy normalisation in advanced economies might provoke additional shortterm proinflationary effects for emerging market economies. Thus, a reversal of capital flows might increase exchange rate fluctuations and overall volatility in the financial markets of emerging market economies. For Russia, rising geopolitical tension is another risk of a temporary intensification of volatility. As regards disinflationary risks, we believe that they have a weaker effect and are primarily associated with supply-side factors. As I have already said, our forecast assumes that some disinflationary factors will materialise next year. These include a partial restoration of production and logistics chains, an expansion of food supply in global markets, and generally a certain adjustment of prices in global commodity markets down from the currently high levels. If this adjustment is more significant, the disinflationary effect will be stronger than predicted in the baseline scenario. I will now speak about our future decisions.

As before, the main risk is that households’ and businesses’ increased inflation expectations may remain high for a long time. If people expect price growth to stay as high in the future, their saving activity will be low. As a result, it will take more time to bring inflation back to the target. Another critical proinflationary risk is the increasing mismatch between labour demand and supply. Specifically, if wage growth is only driven by elevated inflation expectations and labour productivity does not improve, this might accelerate the inflationary spiral. Eventually, price growth will quickly absorb the earlier increase in wages. Another important group of proinflationary risks is related to external factors. Inflation has surged worldwide. This is especially obvious in prices for the products accounting for a large portion in Russian exports or imports (energy commodities, wheat, and sugar). The actual increase in prices for commodities and intermediate goods in production chains has not yet fully passed through to producer costs. Our baseline scenario assumes that price trends in some product groups will reverse to a certain extent next year. However, this change might be less significant than we expect. The risks of a further acceleration of price growth worldwide are associated with both supply- and demand-side factors. As regards supply-side factors, it might take more time to restore production and logistics chains and cope with staff shortages. As the pandemic situation is uncertain, international borders may remain closed longer.