The board of directors of the Bank of Russia has decided to keep the key rate at 7.5% per annum after several reductions, according to a press release published by the regulator following the board meeting on Friday.
"On 28 October 2022, the Bank of Russia Board of Directors decided to keep the key rate at 7.5% per annum. Current growth rates of consumer prices as a whole remain low, contributing to a further slowdown in annual inflation," the press release said. Moving forward, in its key rate decision-making, the regulator plans to take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as the risks posed by domestic and external conditions and the reaction of financial markets.
The Central Bank projects the average key rate at 10.6% per annum in 2022, and in the range of 5-6% in 2025. That said, in case of a further budget deficit expansion, tighter monetary policy may be required to return inflation to target in 2024 and keep it close to the 4% target further on, the regulator noted.
The Bank of Russia presented its adjusted mid-term outlook, which suggested an upgraded GDP dynamics outlook for 2022, at Friday meeting. In particular, the regulator expects GDP contraction by 3-3.5% in 2022. The Russian economy is projected to start growing in the second half of 2023, though by the end of the year the GDP growth rate will remain negative, ranging from -4% to -1%. In 2024-2025 Russia’s GDP will add 1.5-2.5% each year, the regulator said. In its previous forecast the Central Bank expected GDP contraction by 4-6% in 2022, 1-4% for 2023, and GDP growth by 1.5-2.5% was projected for 2024.
The Central Bank’s inflation outlook for the end of 2022 has also been updated to 12-13% from 11-13%, whereas the outlook for 2023 and 2024 remained intact. "The updated forecast of the Bank of Russia takes into account, among other factors, the preponed indexation of utility prices from July 2023 to December 2022. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 5-7% in 2023, return to 4% in 2024 and stabilize close to 4% further on," the press release said.
In September, growth in consumer prices decelerated to 13.7% in annual terms (after 14.3% in August) and declined, as of 21 October, to 12.9%, the regulator added.
The Bank of Russia has upgraded its forecast for capital outflow from Russia to $251 bln from $246 bln for 2022 and downgraded it to $124 bln from $125 bln for 2023. The outlook for 2024 has also been increased to $54 bln from $50 bln. The forecast for 2025 reaches $16 bln.
The outlook on the price of the Urals oil price for 2022 has been lowered to $78 from $80 per barrel. The forecast for 2023 and 2024 remained intact at $70 and $60 per barrel, whereas in 2025 the oil price is projected at $55 per barrel.
