PHOTO - RIA Novosti/Sergey Guneev
On Friday, October 27, the Board of Directors of Bank of Russia, headed by Elvira Nabiullina following the results of the second autumn meeting, it raised the key rate by two percentage points at once - to 15 % per year. The level reached was the maximum since May 2022.
According to the regulator's assessment, inflationary pressure in the Russian economy has increased significantly and is higher than expected. Thus, if in September the annual growth rate of consumer prices of goods and services reached 6 %, then as of 23 October this figure increased to 6.6 %.
"The steady increase in domestic demand is increasingly outstripping the scope for expanding production of goods and services. Inflation expectations remain at elevated levels. Credit growth rates remain high... The decline in fiscal stimulus will be slower than initially expected over the next few years. Under these conditions, further tightening of monetary policy is needed to limit the extent of the upward deviation of inflation from the target," the central bank said in a press release.
According to Central Bank experts, by the end of 2023, the annual inflation rate in Russia could reach 7-7.5 %. By 2024, this figure should drop to 4-4.5 % and in the future it will be close to the target level of 4 %, the regulator predicts.
"We need to evaluate the effect"
Traditionally, changes in monetary policy (MP) are considered one of the central bank's main tools to control inflation. In the event of a noticeable increase in prices, the regulator raises the policy rate, making credit in the country more expensive and increasing the profitability of bank deposits. As a result, people and businesses borrow less, spend less and save more, overall economic activity falls and price pressures ease.
If inflation slows down, the central bank may return to cutting the rate. This in turn should lead to a recovery in business and consumer activity.
(RT/USA)
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