The Central Bank of Russia increased the key rate to 16 percent per annum
Following the meeting of the board of directors on December 15, the Bank of Russia decided to raise the key rate to 16 percent per annum, thus continuing the cycle of monetary policy tightening. Post about this published on the official website of the regulator.
The increase was the fifth in a row; in the first half of the year, the rate remained at 7.5 percent. In October, the Central Bank did not signal the possibility of new growth, but allowed the possibility of setting the rate at 16 percent in the event of increased inflationary pressure.
As explained in the press release, the deviation of the Russian economy from the trajectory of balanced growth in the second half of the year turned out to be more significant than in previous forecasts. GDP growth will exceed the 3 percent expected in October, and inflation will be closer to the upper end of the 7-7.5 percent range.
A month and a half ago, most analysts agreed that the tightening of monetary policy was completed, but closer to the new meeting of the board of directors they revised the forecast towards 16-17 percent. At the same time, banks began to raise deposit rates in advance, considering a neutral solution impossible.
The Central Bank noted that activity in certain segments of the credit market is slowing down, but overall lending growth is still high. At the same time, inflation expectations of the population and price expectations of enterprises increased again. Seasonally adjusted core inflation averaged 11.5 percent annualized over October-November, although it stalled at 9.7 percent in the third quarter.
The regulator indicated that with an additional expansion of the budget deficit, pro-inflationary risks will increase again, which may force an additional increase in the key rate.
Earlier this week, the US Federal Reserve System (FRS) for the third time in a row kept its key rate unchanged at 5.25-5.5 percent, and also signaled an imminent easing of monetary policy. Also the day before, on December 14, the National Bank of Ukraine, due to the improvement in the economic situation, lowered the rate to 15 percent.
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