Russia’s Central Bank has kept the key rate at 7.5% per annum for the fifth consecutive time, noting that it would consider the necessity of key rate hike to stabilize inflation at the targeted level of 4% at its forthcoming meetings.
"On April 28, 2023, the Bank of Russia Board of Directors decided to keep the key rate at 7.5% per annum," the regulator said in a statement following its board meeting on Friday.
"Current rates of price growth have increased since late 2022 but remain moderate, including in the stable components of inflation. Inflation expectations of households are down. They nevertheless remain elevated, as do businesses’ price expectations. Economic activity is rising faster than the February forecast of the Bank of Russia assumed," the statement reads.
"Given gradually rising inflationary pressures, the Bank of Russia’s forthcoming Board meetings will consider the necessity of key rate increase to stabilize inflation close to 4% in 2024 and further on," the statement reads.
The regulator has also changed its average key rate outlook for 2023, currently projecting it at 7.3-8.2% per annum. The outlook for 2024 and 2025 remained intact at 6.5-7.5% and 5-6%, respectively.
"Taking into account new data on economic trends and the ongoing structural transformation of the Russian economy, the Bank of Russia’s baseline scenario forecasts that GDP growth will be 0.5-2.0% in 2023 and 0.5-2.5% in 2024. This means that by the end of 2024 the Russian economy will reach the level of late 2021. In 2025, GDP will continue to grow at a rate of 1.5-2.5%," the Bank of Russia said.
"The economy is rising faster than the Bank of Russia’s February forecast assumed. This reflects both an expansion in domestic demand and the ongoing processes of transformation of the Russian economy. Growing domestic demand is supporting an improvement in business sentiment despite persistently challenging external conditions," according to the statement.
The Central Bank has also downgraded its outlook on annual inflation for 2023 from 5-7% to 4.5-6.5%, whereas 2024 outlook remained intact at 4%. "According to the baseline scenario, given the monetary policy stance, annual inflation will come in at 4.5-6.5% in 2023, return to 4% in 2024 and will be close to 4% further on," the statement reads.