The Board of the Bank of Russia at the next meeting kept the key rate at 7.5% per annum, said in a press release on the regulator’s website. The Central Bank has taken such a decision for the fourth consecutive time. Forbes Remarks that we are talking about the longest break in the dynamics of the key rate for two years.
In a press release, the Central Bank noted that citizens’ inflation expectations have “significantly declined”, but remain at a high level, along with business price expectations.
“The acceleration of the execution of budgetary expenditure, the deterioration of foreign trade conditions and the state of the labor market still constitute pro-inflationary risks”, added the regulator.
In February 2022, after the outbreak of hostilities in Ukraine and the introduction of full-scale anti-Russian sanctions, the Central Bank raised the rate from 9.5% to a record 20%. Since April 2022, the regulator has been gradually reducing the figure. The last time this happened was in September when the rate was cut to 7.5%. At three previous meetings (in October, December and February), the regulator decided to keep the rate at this level.
Under what conditions will the Central Bank decide to raise the rate
Following the February meeting of the Central Bank underline that “if the pro-inflationary risks increase, the Bank of Russia will assess the feasibility of raising the key rate at the next meetings”. At the same time, according to Rosstat, since then annual inflation has decreases from 11.8 to 10.99%.
In the latest “What the Trends Say” bulletin, Central Bank analysts allowed that the regulator will intervene if all the pro-inflationary risks materialize simultaneously and if there is a risk of a “sustained rise in inflation”. We are talking, in particular, about such risks as the weakening of the ruble, the growth of inflationary expectations, the expansion of the budget deficit and the shortage of personnel in the labor market.
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