The Bank of Russia once again decided to keep the key rate at 7.5% per annum, the regulator reported on Friday.
"The Bank of Russia Board of Directors decided to keep the key rate at 7.50% per annum. Current consumer prices are growing at a moderate rate, and consumer demand is subdued. Inflation expectations of households and businesses, essentially unchanged, remain elevated. At the same time, pro-inflation risks are up and prevail over disinflationary risks. This comes as a result of rising inflation pressures from the labor market, worsening foreign trade conditions and a softer fiscal stance," the statement said.
Meanwhile, annual inflation in Russia accelerated to 12.7% as of December 12. "In November, the annual growth rate of consumer prices was 12.0% (vs 12.6% in October). According to 12 December data, annual inflation is up to 12.7%, which takes into account the earlier indexation of utility rates (formerly planned for July 2023)," the report said. According to the Bank of Russia’s forecast, annual inflation will decline to 5-7% in 2023 to return to 4% in 2024.
"The external environment for the Russian economy remains challenging and significantly constrains economic activity. This relates in particular to the logistics problems that still exist in many industries. However, high-frequency indicators suggest some growth in business activity in the fourth quarter," the regulator said.
The regulator noted it "will take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as risks posed by domestic and external conditions and the reaction of financial markets" in its future decisions on the key rate.
At the same time, the Bank of Russia added that "the medium-term balance of risks remains tilted towards pro-inflation risks. Short-term pro-inflation risks have increased and also prevail over disinflationary risks."
The Bank of Russia Board of Directors will hold its next meeting on the key rate on February 10, 2023.
