Russia's central bank raised its key interest rate to a record high since 2003 and may raise it further, as inflation shows no signs of slowing.
Russia's Central Bank says interest rate hike is necessary to combat inflation currently at 8.4%
The Central Bank of Russia on October 25 raised its basic interest rate by 200 basis points to 21%, the highest level since the early years of Vladimir Putin's presidency.
The move, driven by a sharp increase in state spending, especially on the military, also pushed the benchmark interest rate higher than when the market was hit by the country's launch of a special military operation in Ukraine in February 2022, according to Reuters.
The Russian Central Bank said the rate hike was necessary to combat inflation, which is currently at 8.4%. "Further tightening of monetary policy is needed to ensure that inflation returns to target and reduce inflation expectations," the bank said.
The bank said it could raise interest rates again at its next policy meeting and updated its 2025 inflation forecast to 4.5-5.0%, signaling that its 4% policy target was out of reach next year.
Central Bank Governor Elvira Nabiullina told a news conference that there was “no limit” to the key interest rate.
"The central bank admits that it will not be able to bring inflation back to target next year," said economist Evgeny Kogan, calling the move "a surrender to inflation."
Soon after taking office in 2000, Mr. Putin introduced reforms to stabilize the Russian economy after the 1998 financial crisis, allowing the central bank to bring the refinancing rate below 20% in February 2003 and keep it below that level for several years.
The current weakness of the Russian currency, with the official exchange rate against the USD down more than 12% since the beginning of August, is also seen by analysts as a strong inflationary factor.
Source: https://thanhnien.vn/nga-tang-lai-suat-co-ban-len-21-muc-cao-nhat-trong-hon-2-thap-nien-185241026181542351.htm
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