Moscow, Russia: The Russian central bank cut its key interest rate by 300 basis points for the third time since its emergency hike in late February, citing slowing inflation and a rebound in the ruble.
Kirill Kudryavtsev | AFP | Getty Images
Russia's central bank on Friday unexpectedly left key interest rates unchanged at 21%, citing improved monetary tightening that created conditions to tame high inflation.
The bank said that “monetary conditions have tightened more than expected in the key interest rate decision in October,” pointing to factors that are “independent” of its monetary policy.
“Given the marked increase in interest rates to borrowers and the slowdown in credit activity, tight monetary conditions create the necessary prerequisites to resume disinflation processes and return inflation to target, despite higher current price growth and higher domestic demand.” She added.
Markets had widely expected the central bank to raise interest rates by another 200 basis on Friday, after taking such a step in October amid ongoing efforts to curb inflation stoked by the military costs of Moscow's invasion of Ukraine and Western sanctions on its key commodity. exports.
The bank said on Friday that it would evaluate the need to increase its key interest rate at its next meeting in February. Annual inflation is currently expected to fall to 4% in 2026 and remain at this target over the future horizon.
Russia's consumer price index is currently more than double that rate, with annual inflation reaching 9.5% as of December 16, the bank said on Friday, citing continuing pressures, especially in the household and business sectors. The Consumer Price Index reached 8.9% in November on an annual basis, compared to 8.5% in October. The increase was largely driven by higher food prices, with the cost of milk and dairy products rising this year.
The maintenance of interest rates comes even after Russian President Vladimir Putin admitted during his annual question-and-answer session on Thursday with Russian citizens that inflation in the country is a problem and that there is evidence of the economy overheating. However, he stressed that Russia can still achieve economic growth of 3.9% to 4% this year.
“Of course, inflation is a worrying signal. Just yesterday, when I was preparing for today’s event, I spoke with the head of the Central Bank, Elvira (Nabiullina), who told me that the inflation rate was already around 9.3%. But wages were already around 9.3%,” he said, according to comments reported by Interfax and translated by Google. , “It grew by 9% in real terms, and I want to emphasize that – in real terms minus inflation – the disposable income of the population also grew.”
This breaking news story is being updated.
