Food prices fixation for tackling inflation will result in deficit, black market

Food prices fixation for tackling inflation will result in deficit, black market

The Bank of Russia considers food prices fixation as part of tackling inflation dangerous, the regulator’s Chief Elvira Nabiullina said in an interview with the Komsomolskaya Pravda newspaper.

"The price is a balance between demand and supply. Price regulation may be used in emergency, extreme cases, for a very short period, if there are no other opportunities or time is lost, but it is very dangerous," she said, adding that prices kept fixed for a long period results in deficit of goods and the emergence of black market.

Earlier, Nabiullina said that the Central Bank still expected a decline in inflation this fall due to the base effect and the tightening of the monetary policy.

The board of directors of the Bank of Russia raised the key rate for the second time in a row - by 0.5 percentage points to 5.5% per annum at Friday’s meeting, noting that it will possibly rise in the future. The recovery of the Russian and global economies faster than expected, as well as proinflationary risks, were the reasons of such a decision, the regulator explained.

As of June 7, annual inflation in Russia was up to 6.15%, which is much higher than the Central Bank’s projections for 2021 at the level of 4.7-5.2% provided earlier.

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