Russian central bank raises interest rate once more
The Bank of Russia has increased its key interest rate for the second time this year, pointing to ongoing inflation concerns. Read Full Article at RT.com
TroibNews 
Amid ongoing inflationary challenges, the Bank of Russia has announced another raise in its key interest rate, marking the second increment this year. From a previous 18%, the rate has now been adjusted to 19%. The central bank expressed concerns in a recent statement, emphasizing that domestic demand still surpasses the country's capacity for production, which continues to stoke inflation.
The statement further highlighted that inflation is projected to surpass earlier predictions of 6.5-7.0% for the year. Indeed, the bank reported that consumer price increases had reached 9.1% year-on-year in August, significantly overshooting the target of 4%.
In light of these developments, the bank asserted, "Additional monetary tightening is needed to restart the disinflation process [the reduction in inflation]… and ensure that inflation returns to the 2025 target."
Previously, in July, the regulator had implemented a 200 basis points rate hike. Throughout the latter half of 2023, the central bank has elevated the rate five times, escalating from an initial 7.5% up to 18%.
According to the central bank, Russia's economic performance has seen a slight deceleration, drawing from GDP data for the second quarter and economic indicators from July and August. Factors such as restricted supply and reduced external demand have contributed to this slower growth.
Despite these economic challenges, consumer activity has been robust, buoyed by increases in household incomes and historically low unemployment, noted the central bank.
Moreover, the possibility of further rate increases was hinted at for the upcoming October meeting if inflationary pressures do not begin to subside. The bank acknowledged, "remain generally high and have not yet started on a downward trend."
In a broader economic context, Russia's GDP evidenced a growth of 3.6% in 2023 relative to the previous year. Following this, the Ministry of Economic Development has optimistically revised its GDP growth forecast for 2024 to 3.9%, an upgrade from an earlier estimate of 2.8%.
Debra A Smith for TROIB News
The statement further highlighted that inflation is projected to surpass earlier predictions of 6.5-7.0% for the year. Indeed, the bank reported that consumer price increases had reached 9.1% year-on-year in August, significantly overshooting the target of 4%.
In light of these developments, the bank asserted, "Additional monetary tightening is needed to restart the disinflation process [the reduction in inflation]… and ensure that inflation returns to the 2025 target."
Previously, in July, the regulator had implemented a 200 basis points rate hike. Throughout the latter half of 2023, the central bank has elevated the rate five times, escalating from an initial 7.5% up to 18%.
According to the central bank, Russia's economic performance has seen a slight deceleration, drawing from GDP data for the second quarter and economic indicators from July and August. Factors such as restricted supply and reduced external demand have contributed to this slower growth.
Despite these economic challenges, consumer activity has been robust, buoyed by increases in household incomes and historically low unemployment, noted the central bank.
Moreover, the possibility of further rate increases was hinted at for the upcoming October meeting if inflationary pressures do not begin to subside. The bank acknowledged, "remain generally high and have not yet started on a downward trend."
In a broader economic context, Russia's GDP evidenced a growth of 3.6% in 2023 relative to the previous year. Following this, the Ministry of Economic Development has optimistically revised its GDP growth forecast for 2024 to 3.9%, an upgrade from an earlier estimate of 2.8%.
Debra A Smith for TROIB News
