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On September 10, the Bank of Russia Board of Directors decided to raise the key rate by 25 basis points to 6.75% per annum. The bank raised the rate for the fifth time in a row.
“In the second quarter of 2021, the Russian economy reached a pre-pandemic level and, according to the Bank of Russia estimates, is returning to the trajectory of balanced growth, – it says in the press release of the Central Bank of the Russian Federation. “The contribution to inflation from the side of stable factors remains significant due to the faster expansion of demand compared to the possibilities of increasing output.”
In these conditions and taking into account high inflationary expectations, the balance of risks for inflation is shifted towards pro-inflationary ones. “This could lead to a longer deflection of inflation up from the target. The monetary policy pursued by the Bank of Russia is aimed at limiting this risk and bringing inflation back to 4%, ”the message says.
If the situation develops in accordance with the baseline forecast, the Bank of Russia admits the possibility of further increases in the key rate at the next meetings, the regulator notes. Such decisions will be made on the basis of “an assessment of risks from internal and external conditions and the reaction of financial markets to them.”
The Bank of Russia predicts that annual inflation will begin to slow down in the fourth quarter of this year. “Taking into account the ongoing monetary policy, annual inflation will decrease to 4.0-4.5% in 2022 and will remain close to 4% in the future,” the Central Bank notes.
In July, the RF Central Bank raised the rate by 100 bp at once. (up to 6.5%). This was his most decisive move since 2014.
In August annual inflation approached to 7%: the growth of consumer prices accelerated to 6.68%, follows from the data of Rosstat. Another pro-inflationary factor will be added in September – the effect of the pre-election payments promised by President Vladimir Putin to pensioners, military personnel, cadets and law enforcement officers. Analysts estimate the influence of this factor at + 0.2-0.3 percentage points, notes The Bell.
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