High key rate and lowering inflation
The inflation forecast for this year has been raised to 6.5-7%.
The Bank of Russia plans to keep the key interest rate high for a long time and does not rule out raising it, the regulator’s governor Elvira Nabiullina said at a press conference following a meeting of the regulator's Board of Directors, which earlier today decided to raise the key rate to 18% per annum for the first time since December 2023.
Inflation is accelerating, while consumer activity is not cooling down, new inflationary risks have been realized due to sanctions, and the labor market is becoming more rigid - all "triggers" for raising the key rate from 16% to 18% per annum have been realized, Nabiullina said.
The absolute majority of the members of the Board of Directors of the Central Bank was in favor of raising the key rate, but there were also arguments for keeping the rate unchanged, and there were also proposals to raise the rate to 19% and 20% - "to the level where it will be possible to talk about the end of the rate hike cycle with a high degree of probability," she added.
According to her, today's decision to raise the rate to 18% per annum "will prevent" the possibility of stagflation in the Russian economy. The regulator intends to keep the rate "high for a long time" in order to "return and consolidate inflation at the target."
At the same time, the Bank of Russia does not rule out "a further increase in the key rate" and the updated forecast "does not imply a rate cut this year."
Source
The Bank of Russia plans to keep the key interest rate high for a long time and does not rule out raising it, the regulator’s governor Elvira Nabiullina said at a press conference following a meeting of the regulator's Board of Directors, which earlier today decided to raise the key rate to 18% per annum for the first time since December 2023.
Inflation is accelerating, while consumer activity is not cooling down, new inflationary risks have been realized due to sanctions, and the labor market is becoming more rigid - all "triggers" for raising the key rate from 16% to 18% per annum have been realized, Nabiullina said.
The absolute majority of the members of the Board of Directors of the Central Bank was in favor of raising the key rate, but there were also arguments for keeping the rate unchanged, and there were also proposals to raise the rate to 19% and 20% - "to the level where it will be possible to talk about the end of the rate hike cycle with a high degree of probability," she added.
According to her, today's decision to raise the rate to 18% per annum "will prevent" the possibility of stagflation in the Russian economy. The regulator intends to keep the rate "high for a long time" in order to "return and consolidate inflation at the target."
At the same time, the Bank of Russia does not rule out "a further increase in the key rate" and the updated forecast "does not imply a rate cut this year."
Source