Published 16:23 IST, July 26th 2024
Russian central bank hikes rates by 200 bps to 18%, highest in more than 2 years
The market was expecting the hike, a Reuters poll of economists showed, though some dissenting voices in the Russian elite had favoured a more dovish approach.
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Russia's central bank hiked its key interest rate by 200 basis points to 18 per cent on Friday as it grapples with high inflation and an overheated economy, bringing the cost of borrowing to its highest in more than two years.
The regulator also revised its inflation forecast for 2024, raising it to 6.5–7.0 per cent. It sees annual inflation declining to 4.0–4.5 per cent in 2025, in line with its target of 4 per cent.
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The market was expecting the hike, a Reuters poll of economists showed, though some dissenting voices in the Russian elite had favoured a more dovish approach.
The key rate is now at its highest since April 2022. The Bank of Russia raised rates to 20 per cent in an emergency move soon after the Kremlin sent Russian troops into Ukraine in February 2022.
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"Inflation has accelerated and is developing significantly above the Bank of Russia’s April forecast. Growth in domestic demand is still outstripping the capability to expand the supply of goods and services. For inflation to begin decreasing again, monetary policy needs to be tightened further," the bank said in a statement.
Governor Elvira Nabiullina is due to address the media at 1200 GMT. The next rate decision is scheduled for Sept. 13.
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The Bank of Russia raised rates by 850 basis points in the second half of 2023, including an unscheduled emergency hike in August as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy.
Inflation, the bank's main area of concern, stood at 7.4 per cent in 2023, compared with 11.9 per cent in 2022. It is currently running at 9.18 per cent, and economists expect it to remain well above the central bank's 4 per cent target this year.
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16:23 IST, July 26th 2024