However, due to the pace of the recovery, disruptions and bottlenecks in production chains caused by anti-pandemic restrictions, shifts in the structure of final demand from services towards products, a number of industries faced a situation when the expansion of demand surpassed their potential to ramp up output. This involves not only a shortage of production capacities, but also of labour resources. Among other reasons, this was caused by restrictions on the inflow of labour migrants and a larger number of employees who are on the sick leave 1/4  BIS central bankers' speeches  or in self-isolation. Although many of the factors fuelling inflation this year are due to supply issues, this is the expansion of demand which makes it possible for companies to simultaneously and fully pass their increased costs on to output prices and build up their output. No less important is the fact that higher inflation expectations also boost demand, especially for durable goods. In the middle of this year, households’ and businesses’ inflation expectations in Russia rose to their five-year highs. When the expectations regarding future inflation are elevated, households have a lower propensity to save and rather prefer to spend more for current consumption. Moreover, as interest rates are low, households opt to invest in higher-risk securities market instruments, rather than deposit their savings. Companies tend to revise their prices more often. Employees assume that the growth rate of wages will be higher.
The economy will start to recover in 2022 H2, and it will be appropriate to shift towards neutral monetary policy in order to maintain price growth rates in the future. According to the Global Inflation scenario, the acceleration of global inflation will become steadier by 2022. Elevated inflationary pressure and a further rise in inflation expectations will force advanced economies’ central banks to start monetary policy normalisation earlier. In particular, the US Fed might begin to raise its policy rate as early as 2022 Q2. Monetary policy normalisation in advanced economies will cause a decline in external demand and, consequently, a slightly lower growth pace of the Russian economy in 2023–2024, as compared to the baseline scenario. Furthermore, inflation will speed up in 2022, spurred by a rise in Russian companies’ costs and higher inflation expectations. Nonetheless, in 2023– 2024, inflation will edge down closer to 4% due to contracting external demand and a tighter monetary policy than assumed in the baseline scenario. The third alternative considered in the Guidelines this year is the Financial Crisis scenario. Its difference from the Global Inflation scenario is in how financial markets might respond to monetary policy normalisation in the USA. The rebound in the world economy and low rates caused spikes in debt burden, primarily public debt. This process still continues, although at a more moderate pace. It remains to be seen yet whether particular countries are capable of handling this debt burden.