By Rhod Mackenzie
The Bank of Russia at an extraordinary meeting raised the key rate by 350 bp to 12% per annum.
“This decision was made in order to limit the risks to price stability,” the regulator’s website states.
The Central Bank stated that inflationary pressure continues to increase; on August 7, the annual inflation rate increased to 4.4%. “At the same time, the current rate of price growth continues to accelerate. On average, over the past three months, seasonally adjusted current growth was 7.6% on an annualized basis. The same indicator of core inflation increased to 7.1%,” the Central Bank said in a press release.
It is noted that the growth of domestic demand, which exceeds the possibility of expanding output, increases sustainable inflationary pressure and affects the dynamics of the ruble exchange rate through increased demand for imports. “As a result, the ruble depreciation pass-through effect to prices increases and inflation expectations grow,” the regulator explains, pointing out that maintaining the current price growth rates at the achieved levels means a significant risk of inflation deviating upward from the target in 2024.
“The decision taken by the Bank of Russia is aimed at ensuring such dynamics of monetary conditions and domestic demand in general, which are necessary for the return of inflation to 4% in 2024 and its stabilization near 4% in the future,” the message emphasizes.
The next meeting of the Board of Directors of the Central Bank, which will consider the issue of the key rate, will be held on September 15.
Earlier, on July 21, the Central Bank raised its key rate by 100 bp. p., up to 8.5%. Since September last year, the rate has been at the level of 7.5%.