Nabiullina: The Central Bank will keep the rate at an increased level

The Bank of Russia will keep the key rate at an increased level for “quite a long time” reported Chairman of the regulator Elvira Nabiullina at a press conference.

She clarified that in the base scenario, by the end of 2023 the rate will be 13.0–13.6%, and in 2024 – 11.5–12.5% ​​per annum.

“This implies that we will keep the key rate at an increased level for a sufficiently long time necessary for a sustainable reduction in inflation and inflation expectations,” Nabiullina said. The regulator will maintain it until “until it is convinced of the sustainable nature of the inflation slowdown.”

September 15 Central Bank raised the key rate by 1 percentage point to 13%. This is the third consecutive rate increase in a month and a half: first, the Central Bank raised the rate at a meeting on July 21 by 1 percentage point to 8.5%, and then unscheduledly increased the rate on August 15 immediately to 12%.

At the press conference, Nabiullina noted that the sharp movement of the exchange rate in itself was not a risk to financial stability. “However, it led to an additional increase in inflation and inflation expectations. It was to mitigate these factors that we increased the key rate,” she explained.

The increase in the key rate is also aimed at accelerating the adjustment to the tightening of monetary policy (MCP), which has not yet been sufficiently reflected in price conditions. According to the Chairman of the Central Bank, there are factors that weaken the effect of the regulator’s decisions, including increased inflation expectations. For a rate increase to work on the scale needed, it needs to be raised more than “if there were no preferential lending programs,” she added.