The Bank of Russia raised the rate to 4.5%

Источник: The DairyNews
The Central Bank has moved to tighten monetary policy, raising the rate by 0.25 percentage points to 4.5%. The last time the Central Bank did this was in 2018. The regulator is ready to raise the rate further.

The Board of Directors of the Bank of Russia at a meeting on Friday, March 19, for the first time since December 2018, decided to raise the key rate — by 0.25 percentage points, to 4.5%, the Central Bank said in a statement. The decision is not quite in line with market expectations: the Bloomberg consensus forecast showed that most economists expected the rate to remain unchanged. Analysts polled by RBC explained that the Central Bank is likely to keep the rate, although some of them estimated the probability of tightening monetary policy at 30-50%.

The regulator admitted that inflation "is developing above the forecast" (as of March 15, the price increase was 5.8%). At the same time, the recovery in domestic demand "is gaining strength and is moving faster than previously expected, outpacing output growth in a number of sectors," while expectations for external demand are also improving. All this suggests, "the balance of risks has shifted towards pro-inflationary ones."

The Central Bank explains the acceleration of inflation due to the steady nature of the recovery in domestic demand: ‘Its impact on the rate of price growth is reinforced by restrictions on foreign travel. The unspent household funds for this purpose are partially reallocated to the consumption of goods and services within the country.’ However, the Bank of Russia expects that ‘annual inflation will reach its maximum in March and will continue to decline.’

02.04.2021
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