Russia's central bank said it expects the country's gross domestic product (GDP) to fall by 2.4% year-on-year in the first quarter of 2023, with annual inflation standing at 3.6%.
The bank this month warned that any further widening of Russia's budget deficit might compel it to raise interest rates, sending a hawkish signal as it kept the cost of borrowing unchanged but adjusted forecasts for the year ahead.
On Monday, it retained its hawkish tone as it expanded on those forecasts in a monetary policy report, reiterating that a rate hike was more likely than a rate cut this year when taking into account conflicting pro-inflationary and disinflationary risks.
"Minimum annual inflation is expected in April 2023, in the subsequent quarters the impact of pro-inflationary factors will gradually increase," the bank said in its monetary policy report.
It said the inflation expectations of Russian households would continue to significantly influence the central bank's decisions on monetary policy.
The bank said it expected the banking sector's structural liquidity surplus to be between 2.8 and 3.4 trillion roubles ($37.5-$45.5 billion) by the end of 2023.
