Russia raised its key interest rate by 200 basis points to 21% on Friday, citing consumer price increases considerably above its forecast and warning of ongoing high inflation risks in the medium term. This move exceeded the 100 basis-point hike that analysts had expected, bringing the institution’s benchmark rate to its highest level since February 2003, according to Reuters. The key rate had previously been raised by 100 basis points to 19% in September.
The central bank noted that annual seasonally adjusted inflation had reached an average of 9.8% in September, up from 7.5% in August. The bank now expects the inflation rate to range between 8.0% and 8.5% by the end of 2024, which is considerably higher than its previous forecast of around 6.5-7.0% in July.
“Over the medium-term horizon, the balance of inflation risks remains significantly tilted to the upside,” the bank stated. “The key risks are associated with persistently high inflation expectations, the upward deviation of the Russian economy from a balanced growth path, and a deterioration in foreign trade conditions.”
Russia’s economy has been impacted by low global prices for its main oil exports and by Western sanctions imposed following the invasion of Ukraine by Moscow, leading to a decline in the value of the ruble.
This developing news story is being continuously updated.