Russia Central Banker Warns Inflation Spike Is Here to Stay

(Bloomberg) -- The global pressures driving inflation higher represent a “major change in trends” and will keep price growth high for the foreseeable future, Bank of Russia Governor Elvira Nabiullina said.

“Is this episode a short-term spike caused by various post-pandemic factors or a change in trends,” she asked rhetorically at a online session of the Gaidar Forum in Moscow Friday. “I thinks it’s a major change in trends.”

Economy Minister Maxim Reshetnikov echoed her comments on the same panel, saying that inflation pressures will remain high at least into next year.

Nabiullina has been one of the most aggressive in raising interest rates among emerging-market central bankers but inflation remains more than double the 4% target. Price growth remained high early this year, running at an annual rate of 8.6% and several economists have forecast another big interest rate increase at next month’s meeting.

In her comments Friday, Nabiullina said the major factors that drove global inflation down over the last several decades are being reversed by de-globalization, aggressive fiscal stimulus and stable financial regulation, creating what she called a “pro-inflationary” background. The energy transition away from fossil fuels will only add to price pressures over the long term, she said.

In Russia, she added that labor shortages, both of low- and high-skilled workers, add to the inflation problems and pose a challenge to boosting economic growth.

At the same time, she said inflation would be as much as 4 percentage points higher had the central bank not tightened rates as aggressively as it did last year. Reshetnikov, the economy minister, said that without government measures to limit price growth, the rate would have been 9%.

©2022 Bloomberg L.P.