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Russian central bank hikes key interest rate to 13%

Sep 15, 2023

The Central Bank of Russia has raised its key interest rate by 100 basis points to 13% as a response to a weak rouble and persistent inflationary pressures. This is the third consecutive meeting in which the bank has increased borrowing costs. The decision was in line with a Reuters poll, and the bank has stated that further rate increases will be considered at upcoming meetings. The central bank had previously hiked rates by 350 basis points to 12% in response to the tumbling rouble and a call for tighter monetary policy from the Kremlin.

Russia's central bank raised its key interest rate by 100 basis points to 13% on Friday, jacking up the cost of borrowing for the third meeting in succession in response to a weak rouble and other persistent inflationary pressures.

"The Bank of Russia will consider the necessity of (a) further key rate increase at its upcoming meetings," the bank said in a statement on Friday.

The central bank hiked rates by 350 basis points to 12% at an emergency meeting a month ago, responding to the rouble tumbling past 100 to the dollar and a public call from the Kremlin for tighter monetary policy.

The bank's decision to raise rates on Friday was in line with a Reuters poll.

Russia has gradually reversed an emergency hike to 20% which it made in February 2022 after Moscow despatched troops to Ukraine and the West imposed sweeping sanctions, bringing rates to as low as 7.5% this year.

But as sharp rouble weakening fuelled inflationary risks from a tight labour market, strong consumer demand and Moscow's wide budget deficit, the central bank has been forced into a tightening cycle that began in late July.

The central bank adjusted its year-end forecast for inflation to 6.0-7.0% from 5.0-6.5%. Annual inflation was running at 5.33% as of Sept. 11, above the bank's 4% target.

Central Bank Governor Elvira Nabiullina will shed more light on the bank's forecasts and policy in a media briefing at 1200 GMT.

The next rate-setting meeting is scheduled for Oct. 27.

[The Economic Times]

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