Russian central bank holds rates, citing persistent inflation risks
The headquarters of Russia’s central bank in Moscow on Feb. 28, 2022. The Bank of Russia cut rates six times in 2022, taking its key rate from 20% to 7.5%.
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The Central Bank of Russia on Friday left its key interest rate unchanged at 7.5% per annum, citing lingering inflationary risks and stronger-than-expected economic activity trends.
The bank cut rates six times in 2022, taking the key rate from 20% following Russia’s invasion of Ukraine in February to 7.5% in September, holding it steady since.
The Bank said current price growth rates were increasing, but “remaining moderate in terms of sustainable components,” and that “inflation expectations of households and businesses edged down but remain elevated.”
“Economic activity trends evolve better than the Bank of Russia’s October forecast. Although households’ consumer behavior is still cautious, there appear signs of recovery in consumer activity,” the CBR said.
“Accelerating fiscal spending, deteriorating terms of foreign trade and situation in the labor market intensify pro-inflation risks.”
The Russian economy is undergoing a structural transformation as the Kremlin looks to minimize the impact of economic sanctions imposed following the invasion of Ukraine.
Given the uncertainties surrounding the economic outlook, the CBR’s baseline scenario forecasts GDP growth of between -1% and 1% in 2023 and 0.5% to 2.5% in 2024. These projections are notably higher than consensus among global economists.
— Elliot Smith
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