Russia’s central bank raised its key interest rate by 100 basis points to 8.5% on Friday, raising the cost of borrowing as the weak rouble stoked inflationary risks from a tight labour market and strong consumer demand.
It was the first time the bank had lifted rates in more than a year, having gradually reversed an emergency hike to 20% made in late February last year after Russia’s decision to send tens of thousands of troops into Ukraine, which saw the West impose sanctions on Moscow.
It had previously held rates at 7.5% since the last cut in September.
“The Bank of Russia holds open the prospect of (a) further key rate increase at its next meetings to stabilise inflation close to 4% in 2024 and further on,” the bank said in a statement.
The decision surprised analysts polled by Reuters, who had forecast a 50-basis-point hike.
Some analysts had revised their forecasts in recent days to anticipate an even larger raise as inflation data this week showed a jump in households’ inflationary expectations for July and an acceleration in Russia’s weekly consumer prices.
Pressure has increased on the Russian currency after an abortive armed mutiny by the Wagner mercenary group in late June. Attacks on Russian infrastructure which Moscow has blamed on Ukraine have also dampened risk appetite.
Central Bank Governor Elvira Nabiullina will shed more light on the bank’s forecasts and policy in a media briefing at 1200 GMT.—Zawya News
