Risk of financial instability in Russia rising slowly

Significance The resumption of inflation is a consequence of soaring domestic demand outstripping supply, especially for war-related goods and services. The CBR is tightening monetary policy to cool domestic demand and ensure a soft landing for the economy, which is growing rapidly but is vulnerable to overheating. Impacts Disruption to foreign exchange markets will dampen imports and support the ruble exchange rate. Lower credit availability is unlikely to reduce corporate investment as it is mostly financed from companies’ own funds. Higher mortgage interest rates will contain price growth in the real estate market.