Central Bank Of Russia Again Raises Base Rate
The Central Bank of Russia increased the base rate to 13% per annum for the third time in a row. The regulator decided to continue tightening the monetary policy, against the backdrop of accelerating inflation and devaluation of the ruble.
The Board of Directors of the Central Bank of Russia, at a meeting on September 15, decided to increase the base rate from 12% to 13% per annum.
“Inflationary pressure manifesting itself in the Russian economy remains high. Inflationary risks lately have become even more obvious. The two main factors are the growth of domestic demand, which exceeds the ability to adequately increase production, and the weakening of the ruble during the summer months. “Under these conditions, a new tightening of monetary policy has become necessary in order to contain the risks that inflation will rise significantly above the 4% target set for 2024,” the Central Bank wrote. The institution also revised upward its inflation forecast for 2023, which has now risen to 6-7% from the previous estimate of 5-6.5%.
This was the third consecutive increase of the base rate. In July, the Central Bank increased it from 7.5 to 8.5%, and in August, after the exchange rate exceeded the threshold of 100 rubles per dollar, the regulator at an extraordinary meeting increased the interest rate by 350 basis points, to 12%.
On September 14, the European Central Bank (ECB) decided to raise interest rates by a quarter of a percentage point, bringing the main refinancing rate to 4.50%, the deposit rate to 4% (historical maximum), and the margin loans rate to 4.75 percent.