Russian Сentral Bank's key rate raised to 18%

Today, the key rate in Russia has been raised to 18%. The decision has been made at a meeting of the Board of Directors. The corresponding press release following the meeting has been published by the press service of the Central Bank of the Russian Federation.

It concerns the acceleration of inflation in Russia. It significantly exceeds the April forecast.

"The growth of domestic demand continues to significantly outpace the ability to expand the supply of goods and services. In order for inflation to begin to decline again, additional tightening of monetary policy is required, and to return inflation to the target, significantly tighter monetary conditions are required than previously assumed",

the Russian Central Bank said.

According to the Central Bank's press release, it will consider the advisability of a new rate increase during the next meetings.

In addition to this, the Central Bank has significantly revised its forecasts, including increasing the inflation forecast for the current year. The adjusted figure reaches 6.5-7.0%. Next year, as a result of the Central Bank's monetary policy, annual inflation will fall to the target of 4.0–4.5% and remain at this level in the future.

As for the medium-term outlook, pro-inflationary risks prevail. They are caused by the new conditions of foreign trade (which include, among other things, geopolitical tensions), persistently high inflation expectations, as well as deviations of the Russian economy from balanced growth.

As a reminder, following the results of the last meeting held on June 7 and at which the regulator kept the rate at 16% for the fourth time in a row, the Central Bank allowed for the possibility of raising the key rate at the July meeting. The Central Bank explained that the need to return inflation to the target required a longer-term maintenance of tight monetary conditions than it was expected in April.

The next meeting of the Central Bank on the key rate will be held on September 13.