Tail risks in Russian inflation expectations ease from late 2025
A Bank of Russia working paper finds that Russian inflation expectations have become more anchored since late 2025 as households assign lower probabilities to extreme inflation outcomes. Anchoring remains strongest among younger respondents, savers, and financially literate individuals.
Measuring the tails of inflation
Researchers Yulia Krotova and Genrikh Penikas evaluated the anchoring of Russian inflation expectations using a novel criterion: the subjective probability assigned to extreme inflation outcomes exceeding 31 percent annually.
Analyzing 10 waves of an internal crowd survey with 5,868 observations between November 2023 and May 2026, the authors found a clear turning point in late 2025.
The perceived likelihood of extreme price increases declined from December 2025 to February 2026, signaling improving expectation anchoring.
However, overall expectations remain substantially unanchored despite headline inflation slowing to a five-year low of 5.6 percent in 2025.
Demographics and policy credibility
Beta regressions identify several key determinants of tail-risk anchoring.
Respondents who view current conditions as favorable for saving assign significantly lower probability to extreme inflation, as do younger and more financially literate individuals.
Furthermore, larger past inflation increases reduce the subjective probability of future extreme inflation.
The authors link this to expected central bank credibility: respondents anticipate that policy tightening will cool subsequent price pressures.
Valuable metric, skewed sample
The study introduces a useful tail-risk metric to standard inflation tracking.
However, relying on central bank staff rather than a broad representative sample limits the empirical validity of the findings.
Monetary authorities should monitor extreme distribution shifts without treating internal polls as definitive public sentiment.