Support The Moscow Times!

Russian Central Bank Holds Rate at 7.5%, Hints Future Increases

Russian Central Bank Governor Elvira Nabiullina. duma.gov.ru

Russia’s Central Bank on Friday extended its interest rate pause, the longest in more than seven years, as inflation pressures sparked by Moscow’s invasion of Ukraine continued to loom over the economy. 

The Central Bank maintained its key interest rate at 7.5%, a move widely expected by analysts.

But the Bank also hinted at future monetary tightening, adding language to its policy statement that it “holds open the prospect” of a rate rise at its future meetings, with the earliest scheduled for July 21. 

“Current price growth rates, including the stable indicators of inflation, continue to increase. Inflation expectations of households and business’ price expectations remain high,” the Bank’s statement read, noting economic activity was rising faster than it had forecasted in April due to a rebound in domestic demand.

“The overall balance of inflation risks has tilted even more to the upside,” it added.

The bank’s updated forecast put inflation in 2023 at 4.5-6.5%, while it expects inflation to settle at the target rate of 4% sometime next year — a projection unchanged from its last meeting. 

Despite the generally more hawkish tone at Friday’s meeting, Central Bank Governor Elvira Nabiullina sought to reassure markets of the economy’s ability to adapt to the deluge of Western sanctions unleashed against Russia since the invasion of Ukraine.

“Taking into account the gradual replacement of external demand with domestic demand, the economy will fully return to pre-crisis levels next year,” she said.

“The option of raising rates was most likely on the table today, but doing so would have defied market expectations … [which] the Central Bank tries to avoid in order to conduct more transparent monetary policy,” analysts at Raiffeisen Bank Russia wrote.

Ahead of the Central Bank’s last monetary meeting in February, Bloomberg reported that the Kremlin was pressuring the Bank to be “more upbeat” about the Russian economy.

Last year, the Central Bank hiked the key rate to an unprecedented 20% in a bid to tame economic chaos prompted by the invasion of Ukraine and ensuing Western sanctions.

… we have a small favor to ask. As you may have heard, The Moscow Times, an independent news source for over 30 years, has been unjustly branded as a "foreign agent" by the Russian government. This blatant attempt to silence our voice is a direct assault on the integrity of journalism and the values we hold dear.

We, the journalists of The Moscow Times, refuse to be silenced. Our commitment to providing accurate and unbiased reporting on Russia remains unshaken. But we need your help to continue our critical mission.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and you can be confident that you're making a significant impact every month by supporting open, independent journalism. Thank you.

Once
Monthly
Annual
Continue
paiment methods
Not ready to support today?
Remind me later.

Read more