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.

The number of vacant jobs is significantly higher than two years ago, specifically by about a third. Many industries are facing a shortage of workers, including both specialists and low-skilled workers. Speaking of the inflow of labour migrants, it has already returned to the pre-pandemic level, according to recent data. However, as the demand in the industries with a large portion of labour migrants (in courier services and construction) has surged over this period, companies still experience a deficit of labour migrants. Consequently, the rise in the demand for labour in various groups of employees is translating into the steady increase in nominal wages. In the course of the discussions preceding our today’s decision, several executives of our regional branches stressed that increasingly more companies were forced to raise wages at a double digit pace to be able to retain their employees. The staff shortage is a factor limiting enterprises’ capacities to expand output. It is hard for them to catch up with growing demand. This suggests that proinflationary risks brought about by labour market gaps are strengthening. Monetary conditions continue adjusting to our earlier decisions on the key rate. After the meeting in October, nominal interest rates, including on federal government bonds, deposits, and loans, continued to go up. Yields on federal government bonds rose over the entire curve. The growth of short-term yields has been mostly driven by the increase in the key rate and the updated forecast of its further path, whereas long-term yields are largely influenced by the escalation of geopolitical tensions.