The Central Bank of Russia announced on Friday that it raised its monetary policy rate by 100 basis points to 8.5% from 7.5%. The decision was in line with expectations. The ruble did not show major variations after the decision was known.
“If the situation unfolds according to the baseline forecast, the Bank of Russia keeps open the prospect of a further key rate hike at its next meetings,” the central bank said. He indicated that they will take into account the real and expected inflation movements in relation to the goal and the economy. They estimate that annual inflation will drop to 4.0-4.5% by the end of 2022 and it will stay close to 4% later on.
The Bank of Russia clarified that the inflation is developing above October forecasts. “The contribution of persistent factors to inflation remains considerable due to faster growth in demand relative to the capacity to expand production,” the institution explained. They see that given rising inflation expectations, the balance of risks to inflation “is sharply tilted upward.”
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