Russia's central bank holds key rate at 14% as inflation risks persist
Russia's central bank held its key interest rate at 14% on Friday, opting to keep borrowing costs high as inflation risks persist, according to the decision reported by The Moscow Times. Annual inflation reached 6.8% earlier in the week, and policymakers raised their full-year forecast to 7.1% to 7.6%, while still expecting price growth to return toward the 4% target next year.
The central bank said underlying price growth had not yet slowed, attributing part of the pressure to a temporary reduction in production capacity in some sectors. It also cited inflation risks linked to the war in Iran and its effect on global energy markets, with oil rising above $116 a barrel on Friday for the first time since May. Governor Elvira Nabiullina said the speed at which production capacity is restored, and the secondary effects on prices across a broad range of goods, were both sources of uncertainty.
Policymakers raised their projected key rate range for next year by two percentage points to 12.5% to 13.5%, even as they lifted their growth forecast for this year to 0.5% to 1%. Nabiullina said individual opinions favoured a rate increase, but only one option, holding the rate unchanged, was discussed in detail. Sofia Donets, chief economist at T-Investments, said the neutral signal in the press release left room for another cut this year.
The hold, widely expected by analysts, comes as spending on the war in Ukraine strains government finances and Ukrainian strikes on refineries and commercial sites raise the cost of some goods. The central bank's next rate meeting is scheduled for 18 December.
