Nabiullina allowed to raise the key rate in case of inflation acceleration

The head of the Central Bank, Elvira Nabiullina, said that the regulator may consider raising the key rate at the next meetings of the board of directors if it notices signs of increased price pressure that threatens to achieve the inflation target of 4%. Now the key rate is set at 7.5%. The next meeting on the rate is scheduled for June 9.

“This year we are waiting for the continuation of the economic recovery. It may be accompanied by increased inflationary pressures. And this will largely depend on factors on the demand side. If we see signs of such an acceleration in inflation, which will become a threat to achieving the 4% goal in 2024, then we may need to raise the key rate at the next meetings, ”Ms. Nabiullina is quoted in the report on the monetary policy of the Central Bank (.pdf).

The head of the Central Bank said that in the Russian economy there is a wide range of risks, mainly pro-inflationary ones. The updated average key rate forecast is 7.3–8.2% for 2023 and 6.5–7.5% for 2024.

From the report on the monetary policy of the Central Bank, it follows that the decline in GDP in the first quarter of 2023 amounted to 2.3%. In the second quarter, the regulator expects the growth of the Russian economy by 4.2%. The GDP growth forecast has improved to 0.5-2% (previously – from -1% to 1%) due to a higher level of consumer and investment activity in the first quarter.

In the baseline scenario of the Central Bank, inflation will be 4.5–6.5% in 2023, and 4% in 2024. According to the forecasts of the regulator, the Russian economy will return to the level of the end of 2021 by the end of 2024. At the last meeting, the Board of Directors of the Central Bank saved key rate at 7.5% for the fifth time.

Lusine Balasyan