The Board of Directors of the Bank of Russia has raised the key rate from 19% to 21% per annum, the regulator said in a statement.
This is the third increase in the key rate of the Russian Central Bank in a row, and 21% is its maximum value in history. The previous record high of 20% was reached in February 2022, after the start of the military operation and the freezing of the Central Bank's gold and foreign exchange reserves abroad. But in the spring, the Bank of Russia moved to a gradual easing of monetary policy.
"Inflation is significantly higher than the July forecast of the Bank of Russia. Inflation expectations continue to increase. The growth of domestic demand is significantly outpacing the possibilities of expanding the supply of goods and services. Additional budget expenditures and the associated expansion of the federal budget deficit in 2024 have pro-inflationary effects. Further tightening of monetary policy is required in order to ensure the return of inflation to the target and reduce inflation expectations," the Central Bank said in a release on the rate increase.
In 2022, the rate was raised to 20% in order to mitigate the risks of financial stability and prevent the outflow of funds from banks, explained the chairman of the Bank of Russia Elvira Nabiullina at a briefing. Now the situation is different — it is growing in response to rising inflation, Nabiullina said.
"Over the past three years, the price level has increased by 30%. At the same time, the price increase over the past year can no longer be explained by structural changes in the economy. It is a consequence of the increased overheating of demand, the growth of which outstripped the pace of expansion of supply," Nabiullina said