Bank of Russia analysts expect a gradual return to neutral policy by 2029

A return to neutral monetary policy would take place by 2029 under the baseline scenario, according to researchers at the Bank of Russia. Their assessment appears in the October Talking Trends bulletin.

Annual inflation exceeded 7% after the October increase in utility tariffs. The researchers estimate that underlying measures of price growth remained in a range of 5–6% in September.

They say bringing inflation back to the 4% target in 2027 requires more restrained growth in aggregate demand and a gradual recovery in production capacity.

The bulletin also identifies changes in the labour market. Seasonally adjusted unemployment fell again in August. Monthly nominal wage growth accelerated in July to its fastest pace since January, while companies' pay increase plans stopped declining and rose slightly in September.

The scenario for a return to neutral policy by 2029 assumes no new prolonged shocks and fiscal policy consistent with the government's current plans. Those plans envisage eliminating the structural primary budget deficit in 2029.