Russia's Central Bank raises interest rates for first time in over a year

The Central Bank of Russia has raised its inflation forecast for the end of this year to 5-6.5%, from the previously forecast 4.5-6.5%, and left open the possibility of further interest rate hikes in the near future.

The Central Bank of Russia in Moscow. (Photo: AFP/VNA)

On July 21, the Central Bank of Russia (CBR) raised interest rates more strongly than expected, by 100 basis points to 8.5%, amid a weak ruble and high inflationary pressures.

This is the first time the CBR has raised interest rates in more than a year, since February 2022, when it announced an increase in the key interest rate from 9.5% to 20% as an emergency measure amid "sharp changes" in external conditions for the Russian economy .

In September 2022, CBR cut interest rates to 7.5%.

Inflation risks have increased significantly in the medium term and domestic demand is outstripping production capacity, the CBR said in a statement. This is adding to inflationary pressures, while the depreciation of the ruble this year has also significantly increased inflation risks.

The bank raised its inflation forecast for the end of this year to 5-6.5%, from 4.5-6.5% previously, and left open the possibility of further interest rate hikes in the future. Russia's inflation rate has now fallen below the CBR's target of 4% after soaring to a record high in more than 20 years.

The next CBR policy meeting is scheduled for September 15./.

Phan An (Vietnam News Agency/Vietnam+)