The Central Bank of Russia raised on Friday your key interest rate for the fourth time in half a year in an effort to reduce the rising inflation. The bank raised the rate to 15%, 200 basis points more. The interest rate in the first half of the year was 7.5%.
“Current inflation pressures have increased sharply to a level higher than the Bank of Russia’s expectations,” the bank said in a statement.
He detailed that seasonally adjusted price growth in the third quarter exceeded 12% annualized and inflation for the year is expected to be around 7 percent. The bank added that He expected inflation to fall to about 4% in 2024.
The increase in interest rates aims to prevent inflation increasing the cost of loans and encouraging savings.
“Constantly increasing domestic demand increasingly exceeds the ability to expand the production of goods and the provision of services. Inflation expectations remain high. Credit growth rates are invariably high,” the bank highlighted.
The sanctions imposed for Russia’s military operation in Ukraine and increased defense spending have taken their toll on the Russian economy, particularly the exchange value of the ruble, which has fallen about 25% against the US dollar this year.
The BCR indicated that the expansion of domestic demand is also manifested in the persistently high demand for imported products, which has had a significant impact on the weakening of the ruble in the course of 2023.
If on January 1 of this year the Russian currency was quoted at 70.3 units per dollar, today its price is 93.5 rubles per greenback, and this is only thanks to the recovery it has experienced in recent weeks after exceeding the American currency the barrier of 100 rubles.
The recovery of the ruble is due to the measure recently imposed by the Russian leader, Vladimir Putinto force exporters to sell almost all of their currencies in the market.
At its meeting, the BCR also revised upwards its GDP growth forecast for this year, which stood at 2.2-2.7%, seven and two tenths of a percentage point, respectively, more than in the previous estimate.
The Russian monetary entity, however, kept the growth ranges unchanged for 2024 (0.5-1.5%), 2025 (1-2%) and 2026 (1.5-2.5%).
(With information from AP and EFE)