Moscow, Russia, June 9, 2024: The guardhouses of the Kremlin (left) and the Ministry of Foreign Affairs (center, background) stand in the center of the capital. Photo: Ulf Mauder/dpa (Photo: Ulf Mauder/Photo Alliance via Getty Images)
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Russia’s central bank raised its key interest rate by 200 basis points to 21% on Friday, citing consumer price increases that were much higher than it expected. and warned of continued high inflation risks over the medium term.
Key interest rate rises 100 basis points to 19% September.
Friday’s move beat analysts’ expectations for a 100 basis point rate hike and brought the agency’s benchmark rate to its highest level since February 2003, Reuters reported. The last time it came close to similar levels was in February 2022, when Russian policymakers Increase to 20% The move came days after Moscow invaded neighboring Ukraine to calm local markets.
The bank took a tough stance on further policy measures on Friday. According to Google Translate, Russian Central Bank Governor Elvira Nabiullina said in a briefing after the decision that the institution’s board of directors has considered raising the benchmark interest rate to above 21% and will raise the benchmark interest rate at the next meeting in December. The possibility of further interest rate hikes was reserved at the meeting. Comment Reported by Russian state news agency TASS.
The report noted that seasonally adjusted annual inflation averaged 9.8% in September, up from 7.5% in August. That number is now expected to be in the 8.0-8.5% range by the end of 2024, and “significantly higher” than the nearly 6.5-7.0% forecast in July.
“In the medium term, the balance of inflation risks remains significantly tilted to the upside,” the bank said in a statement. “The main risks are related to persistently high inflation expectations, the Russian economy’s departure from a balanced growth path and deteriorating foreign trade conditions.”
The bank expects annual inflation to fall to 4.5-5.0% in 2025 and 4.0% in 2026.
Russia’s economy has been constrained by sluggish global prices for its main oil export and Western sanctions that have restricted trade, drained Moscow’s coffers for the war in Ukraine and led to ruble depreciation. At 12:52 noon London time, the dollar rose 0.36% against the ruble.
Russia raises interest rates – at a time when the European Central Bank and the Federal Reserve are taking steps to ease monetary policy – Concerns raised It may inhibit the country’s economic growth.
International Monetary Fund predict Russia’s inflation rate this year has averaged 7.9%, and its October World Economic Outlook noted that the country’s GDP will fall from 3.6% this year to 1.3% in 2025, “due to reduced labor market tightness and economic growth. slowdown, private consumption and investment slowed down.” Wage increases. “
