elvira nabiullina : review of recent inflation developments in russia and economic outlook statement by ms elvira nabiullina, governor of the bank of russia, in the follow - up to the board of directors meeting, moscow, 17 december 2021. * * * good afternoon, we have made the decision to raise the key rate by 100 basis points to 8. 50 % per annum. inflation is still high. our decision is aimed at ensuring its reduction to the target by the end of next year. i would now dwell on the reasons behind our today ’ s decision. i will start out with inflation. its acceleration in october and november was caused by both transitory and steady factors. the former include delays in harvesting, soaring prices for new year ’ s holidays abroad, as well as the persistent deficit in the car market due to disruptions in component supplies, and a number of other supply - side constraints. even if we leave aside the surge in product and service prices, we have the stable component of inflation which considerably exceeds our target. this is because the growth of demand still surpasses the capacities to ramp up supply. in this context, our special focus is to ensure that the monetary policy is well - balanced. what do we mean by that? it is the stable component of inflation related to demand trends that monetary policy impacts directly. however, we should not ignore temporary factors. according to the experience of the last three months, these factors are not only accelerating overall price growth, but are also intensifying inflation expectations. hence, temporary factors are becoming steady. when inflation expectations remain high, we need more time and a more significant tightening of monetary policy to be able to return inflation to the target. if we delay this, both inflation and inflation expectations will continue to go up. of course, a very tight policy aggressively responding to transitory factors could bring inflation back to 4 % more quickly. however, this would entail a slump in economic activity and a subsequent considerable deviation of inflation downwards from the target. the objective of a well - balanced monetary policy is to ensure price stability and limit sharp fluctuations in inflation, whether upwards or downwards. our baseline forecast assumes that inflation will decrease to 4 – 4. 5 % by the end of 2022. it takes into account both a reduction in the steady component of inflation and the reverse — disinflationary — influence of a part of temporary factors. in other words, we assume that prices for certain products and services

that have soared this year can adjust downwards next year. in some cases, this will be owing to the normalisation of the supply - side situation ; in others — the downward trend may emerge as elevated demand diminishes. we have observed such processes this year already. for instance, if we talk about prices for pork and chicken bought most frequently, there were periods of price surges provoked by the worsening of the epizootic situation. nonetheless, supply has rebounded by december and weekly statistics show that prices have declined, although only slightly. an illustrative example of price adjustment when soaring demand goes down is chip boards and metal roofing tiles. the annual growth of prices for these goods remains high due to the drastic increase in the first half of the year. nevertheless, after the peak in july, prices for boards and tiles have declined by 20 % and 14 %, respectively. i will now speak of the economic situation. according to our estimates, economic activity 1 / 4 bis central bankers'speeches is growing faster this quarter as compared to the previous one, but predictably more slowly than during the period of its active recovery in the second quarter of 2021. as of the end of the year, the overall increase in gdp might reach nearly 4. 5 %. output is expanding in a wide range of industries. as of the date of the board of directors meeting in october, output in services was still below pre - pandemic readings, whereas today ( despite the rather challenging pandemic situation ) it has approached this level. by the moment, oil output has not recovered completely due to the opec + oil production cuts. passenger transportation is still below pre - pandemic volumes as well. as shown by high - frequency indicators, both consumer and investor demand continues to trend upwards steadily. investment growth is supported by a substantial rise in corporate profit in many sectors and expectations about a further expansion of demand. i would now focus on the labour market. in october, unemployment decreased to 4. 3 %, which is its record low. the demand for labour continues to grow. 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