up inflation rather than expand output. this brings us directly to the second factor underlying our today ’ s decision. inflation becomes a growing concern. in may, annual price growth rates reached 6 %, considerably exceeding the target level. the current inflationary pressure has intensified. the average three - month ( from march to may ) seasonally adjusted price growth peaked up to a maximum since january 2016. similar trends are observed for other indicators of price dynamics under our consideration. it does not seem correct to attribute this elevated price growth exclusively to the impact of transitory supply - side factors, in particular, global price movements. let me remind you that this explanation was the main one when prices picked up in q4 last year. at that moment, doubts indeed persisted as to the sustainable nature of demand recovery given the ongoing pandemic. nonetheless, even then we aired fears that the rise in inflation expectations driven by these external shocks might transform one - off proinflationary factors into sustainable ones. we may see now that in recent months the proinflationary impact of demand has become prevailing. the fundamental difference of the so - called ‘ cost inflation ’ from ‘ demand inflation ’ is how it influences the physical volumes of consumption. in case of ‘ cost inflation ’, that is, supply shock, prices are growing, but consumers have to buy less in response. businesses can only partially translate their costs into prices, as demand is limited. whereas, if both prices and sales volumes grow, and this is exactly what we are seeing now across quite a few market segments, it means that the expansion in demand is by far exceeding the impact of supply - side factors. therefore, it means that we are facing ‘ demand inflation ’. finally, elevated inflation expectations do make a considerable contribution to inflation. in anticipation of price increases, consumers are ready to start buying earlier than they previously planned. thus, given the unanchored expectations even transitory price spikes may become more sustainable. why is the acceleration of inflation posing a threat? it is more difficult for companies to stick to their business plans, predict financial flows, and hedge against volatility. it is the most vulnerable citizens that are hardest hit by inflation. low - income families spend increasingly more funds on essential goods. high inflation boosts inequality, lowers social security, and undermines the financial standing of most families. that is why our main task is to stabilise price growth 2 / 4 bis central bankers'speeches as soon as possible by

, it comes as a reflection of the seasonality which is typical of balance of payments figures. second, we look to normalisation in the accumulation of foreign assets, which has quickened considerably since the middle of the past year in the context of strengthened external, including geopolitical risks. our medium - term economic growth outlook is essentially the same. 1 - 1. 5 % gdp growth in the current year is expected to accelerate gradually to 2 - 3 % in 2021. having said that, our forecast will largely depend on the timeframes and successful implementation of the national projects along with other fiscal policy decisions. discussions are currently underway about possible options of spending the liquid part of the national wealth fund in excess of the 7 % of gdp cap. as we look into such options, it is imperative that we remember the key objective of the fiscal rule, which is to reduce the reliance of the economy, of the real exchange rate and of public finances on a volatile energy price environment so that they all become stabilised in a state equivalent to the oil price cut - off. we have largely delivered on this objective, with the impact of oil price fluctuations on the russian economy having considerably weakened. current suggestions are essentially focused on changes to the rule. they could result in either direct or indirect change in the cut - off price, entailing a strengthening of the real ruble exchange rate and undermining competitiveness of our products. alternatively, the stabilising mechanism of the fiscal rule could be undermined, yet again adding to the vulnerability of the russian economy to fluctuations in external environment. more so, the 7 % of gdp cap was set a long time ago ; yet another review is needed to establish whether this volume of liquid assets is adequate to resist to sharp and lengthy change in external conditions. as we review these and similar suggestions, we urge to fully consider the benefit and loss balance driven by change in macroeconomic conditions which may be tangible enough. approaches to fiscal and structural policies will have a significant impact on both our forecast and estimates of the balance of risks for inflation. this will in turn determine the monetary policy path. 3 / 3 bis central bankers'speeches