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Russia’s central bank keeps key rate at 20%
On March 18, 2022, the Board of Directors of the Bank of Russia decided to keep the key rate at 20% per annum, the regulator's website informs.
According to a statement made by the Bank of Russia, against the backdrop of dramatically changed external conditions, a sharp increase in the key rate undertaken by the regulator on February 28 supported financial stability and prevented an uncontrolled rise in prices. The Russian economy is entering a phase of massive restructuring that will entail a temporary but inevitable period of higher inflation, largely driven by the adjustment of relative prices for a wide range of goods and services. The monetary policy of the Bank of Russia will form conditions for the gradual adaptation of the economy to the new environment and the return of annual inflation to 4% in 2024.
The Central Bank also said that “a dramatic change in external conditions for the Russian economy created a threat to financial stability.” The increase in the key rate on February 28 and capital control measures helped to maintain the steady performance of the Russian financial system.
According to the regulator, the increase in deposit rates restored the influx of funds to fixed-term ruble bank deposits and stabilized the population's demand for cash.
According to the weekly estimates of the central bank, inflation has accelerated significantly since early March. The current price dynamics is largely affected by a surge in consumer demand for certain groups of goods amid increased uncertainty and rising inflationary expectations, as well as the weakening of the ruble since the beginning of 2022.
“Adaptation of business to the changing external conditions, including the restructuring of production and supply chains, will become a factor determining the dynamics of relative prices over the coming quarters,” the regulator said in a statement.