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Bank of Russia raised its key rate by 100 bp to 9.50% per annum
“Inflation is well above the October forecast of the Bank of Russia. Demand expansion continues to outpace the ability to increase production. The rapid growth of economic activity with limitation of available labor resources increases inflationary pressure,” the regulator said in a statement.
The Central Bank believes that the situation on global commodity markets remains pro-inflationary, while inflation expectations have not yet declined, remaining at lasting many years highs. In these circumstances, the balance of risks for inflation has shifted even more toward the pro-inflationary side. At the same time, the Bank of Russia declares the return of inflation to 4% as the goal of the current monetary policy.
“If the situation develops in accordance with the baseline forecast, the Bank of Russia admit the possibility of further increases in the key rate at the next meetings. Decisions on the key rate will be made with respect to the actual and expected dynamics of inflation against the target, economic development on the forecast horizon, as well as assessment of risks from internal and external conditions and the response of financial markets to them,” the Central Bank said in an official statement.
According to the forecast of the Bank of Russia, taking into account the ongoing monetary policy, annual inflation will drop to 5.0-6.0% in 2022 and return to the target in mid-2023. The Central Bank believes that, later on, annual inflation will be about 4%.