Russian central bank raises interest rate to 18%
The Bank of Russia has increased the key interest rate for the first time this year, attributing the decision to escalating inflation. Read Full Article at RT.com
TroibNews 
The Bank of Russia announced an increase in its key interest rate to 18% from 16%, attributing the move to mounting inflationary pressures. The regulator explained in a statement on Friday that domestic demand is outstripping the economic capacity for production of goods and services.
According to the statement, inflation has picked up pace and is significantly higher than the bank's earlier projections in April. The Bank of Russia now expects an inflation rate of 6.5-7.0% for the year, adjusting its forecast upwards after June's inflation rate reached 8.6%, well above the government’s target of 4%.
If there had been no adjustment in interest rates, Russia could have faced stagflation, a scenario characterized by slow economic growth coupled with high inflation and unemployment, explained Elvira Nabiullina, the head of the central bank, in a press conference following the rate decision. "The term refers to the combination of slow economic growth, high inflation, and high unemployment," she said.
Nabiullina emphasized that the elevated key rate would be maintained "for as long as necessary" to reduce inflation to the target of 4%. She also mentioned that further tightening of monetary policy might be required.
The latest increase is expected to help reduce inflation to between 4.0% and 4.5% by 2025, the central bank noted.
This rate adjustment is the first since December, following a 100 basis-point increase that brought the rate to 16% per annum. Since the summer of 2023, when the rate was 7.5%, this has marked several consecutive hikes.
Further economic data presented by the central bank from the second quarter show that the Russian economy is experiencing robust growth. There is significant consumer activity, bolstered by substantial rises in household incomes and consumer confidence.
Russia’s GDP saw a 3.6% growth in 2023 compared to the previous year, outpacing the 3.2% growth projected by the International Monetary Fund for 2024.
The next review meeting for the Bank of Russia’s key rate is scheduled for September.
James del Carmen for TROIB News
According to the statement, inflation has picked up pace and is significantly higher than the bank's earlier projections in April. The Bank of Russia now expects an inflation rate of 6.5-7.0% for the year, adjusting its forecast upwards after June's inflation rate reached 8.6%, well above the government’s target of 4%.
If there had been no adjustment in interest rates, Russia could have faced stagflation, a scenario characterized by slow economic growth coupled with high inflation and unemployment, explained Elvira Nabiullina, the head of the central bank, in a press conference following the rate decision. "The term refers to the combination of slow economic growth, high inflation, and high unemployment," she said.
Nabiullina emphasized that the elevated key rate would be maintained "for as long as necessary" to reduce inflation to the target of 4%. She also mentioned that further tightening of monetary policy might be required.
The latest increase is expected to help reduce inflation to between 4.0% and 4.5% by 2025, the central bank noted.
This rate adjustment is the first since December, following a 100 basis-point increase that brought the rate to 16% per annum. Since the summer of 2023, when the rate was 7.5%, this has marked several consecutive hikes.
Further economic data presented by the central bank from the second quarter show that the Russian economy is experiencing robust growth. There is significant consumer activity, bolstered by substantial rises in household incomes and consumer confidence.
Russia’s GDP saw a 3.6% growth in 2023 compared to the previous year, outpacing the 3.2% growth projected by the International Monetary Fund for 2024.
The next review meeting for the Bank of Russia’s key rate is scheduled for September.
James del Carmen for TROIB News
