Russian central bank raises key interest rate to unprecedented high
The Russian central bank has reported that inflation is currently “considerably higher” than anticipated. Read Full Article at RT.com.
TroibNews 
Inflation remains “considerably higher” than expected, the regulator has stated.
The Bank of Russia has increased its key interest rate by 200 basis points, reaching a historic high of 21%, due to ongoing inflationary pressures. The regulator noted that domestic demand is surpassing the economy's ability to produce adequate goods and services to satisfy it, as expressed in a statement released on Friday.
Inflation is “considerably higher” than the bank’s July forecast of 6.5-7.0% for the year, the statement revealed. Consumer prices experienced a seasonally adjusted rise of 9.8% year-on-year in September, following a 7.5% growth in August. The regulator anticipates that overall inflation for the year will range between 8.0% and 8.5%, which is double the government's target of 4%.
The central bank pointed out that increased government spending and a broader budget deficit recorded this year have contributed to rising inflation.
“Additional monetary tightening is needed to ensure that inflation returns to the 2025 target, and inflation expectations are lowered,” the regulator stated.
The Bank of Russia foresees that its monetary policy will reduce inflation to 4.5-5.0% by 2025, eventually reaching the target of 4.0% in 2026.
In recent months, the regulator has implemented a tightening strategy, raising the key interest rate by 200 basis points in July and then increasing it from 18% to 19% in September.
According to Bank of Russia Governor Elvira Nabiullina, the stringent monetary policy has helped to prevent inflation from escalating further.
The current rate surpasses the 20% rate established in 2022, shortly after the exacerbation of the Ukraine conflict and the resulting sanctions from the West. The benchmark rate was last at 21% in 2003.
Nabiullina indicated that another increase of 200 basis points could be on the table at the next meeting scheduled for December.
Earlier this week, the International Monetary Fund identified Russia as the world’s fourth-largest economy in terms of purchasing power parity. The organization reported that Russia's gross domestic product for 2024 will represent 3.55% of global GDP based on PPP, placing it behind China, the US, and India.
James del Carmen contributed to this report for TROIB News
The Bank of Russia has increased its key interest rate by 200 basis points, reaching a historic high of 21%, due to ongoing inflationary pressures. The regulator noted that domestic demand is surpassing the economy's ability to produce adequate goods and services to satisfy it, as expressed in a statement released on Friday.
Inflation is “considerably higher” than the bank’s July forecast of 6.5-7.0% for the year, the statement revealed. Consumer prices experienced a seasonally adjusted rise of 9.8% year-on-year in September, following a 7.5% growth in August. The regulator anticipates that overall inflation for the year will range between 8.0% and 8.5%, which is double the government's target of 4%.
The central bank pointed out that increased government spending and a broader budget deficit recorded this year have contributed to rising inflation.
“Additional monetary tightening is needed to ensure that inflation returns to the 2025 target, and inflation expectations are lowered,” the regulator stated.
The Bank of Russia foresees that its monetary policy will reduce inflation to 4.5-5.0% by 2025, eventually reaching the target of 4.0% in 2026.
In recent months, the regulator has implemented a tightening strategy, raising the key interest rate by 200 basis points in July and then increasing it from 18% to 19% in September.
According to Bank of Russia Governor Elvira Nabiullina, the stringent monetary policy has helped to prevent inflation from escalating further.
The current rate surpasses the 20% rate established in 2022, shortly after the exacerbation of the Ukraine conflict and the resulting sanctions from the West. The benchmark rate was last at 21% in 2003.
Nabiullina indicated that another increase of 200 basis points could be on the table at the next meeting scheduled for December.
Earlier this week, the International Monetary Fund identified Russia as the world’s fourth-largest economy in terms of purchasing power parity. The organization reported that Russia's gross domestic product for 2024 will represent 3.55% of global GDP based on PPP, placing it behind China, the US, and India.
James del Carmen contributed to this report for TROIB News
