The Central Bank allowed further rate hikes

The Bank of Russia allows an additional increase in the key rate if pro-inflationary risks increase, the press service of the regulator said.

The Central Bank reiterated that further decisions on the rate will be made taking into account the actual and expected inflation dynamics relative to the 4% target, the process of economic restructuring, as well as the assessment of risks from internal and external conditions and the reaction of financial markets to them.

“And in the event of an increase in pro-inflationary risks, an additional increase in the key rate is possible,” the Central Bank concluded (quote according to TASS).

Earlier today, on August 15, the Board of Directors of the Bank of Russia, following an extraordinary meeting, raised the key rate by 3.5 percentage points to 12% per annum. The last time the Central Bank raised the rate less than a month ago – by 1 percentage point at a meeting on July 25. Since September 2022, it has been at the level of 7.5% per annum. Analysts polled by Vedomosti expected a rate increase of 1-6.5 percentage points to 9.5-15%, attributing this to a steep depreciation of the national currency.

The regulator himself explained the rate increase as an attempt to limit the risks to price stability. The impact on the rate, according to the Central Bank, has an increase in domestic demand, exceeding the possibility of expanding output, increasing sustainable inflationary pressure. As of August 7, annual inflation increased to 4.4%. On average, over the past three months, seasonally adjusted current growth was 7.6% on an annualized basis. The Central Bank maintains the forecast for the return of inflation to the target of 4% in 2024.

The next meeting of the Board of Directors of the Central Bank, which will consider the issue of the level of the key rate, is scheduled for September 15.