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Russia raises interest rates by 200 basis points, reaching 21 percent
(MENAFN) On Friday, the bank of Russia made the decision to raise its policy interest rate by 200 basis points, reaching a new historical peak of 21 percent. This hike underscores the central bank’s aggressive approach to addressing inflationary pressures in the Russian economy, setting rates at a level unseen in recent years.
Since July 2023, the Bank of Russia has been steadily increasing interest rates, initially from 8.5 percent to 19 percent by September. Despite a consensus among market analysts anticipating a rate of 20 percent for this latest meeting, the bank’s more aggressive increase signals a stronger-than-expected response to escalating inflation concerns.
The central bank cited inflation as being significantly above earlier forecasts, with consumer expectations for inflation continuing to rise. According to the bank, this persistent demand has outpaced the country's ability to increase the supply of goods and services, contributing to a greater imbalance that fuels price increases. This ongoing excess in demand reflects pressures that require further intervention to stabilize prices.
Looking forward, the Bank of Russia has set a target to bring annual inflation down to a range of 4.5 percent to 5 percent by 2025, and ultimately to 4 percent by 2026. The bank aims to maintain inflation at this target level over the longer term, underscoring its commitment to reining in inflation and fostering a more balanced economy.
Since July 2023, the Bank of Russia has been steadily increasing interest rates, initially from 8.5 percent to 19 percent by September. Despite a consensus among market analysts anticipating a rate of 20 percent for this latest meeting, the bank’s more aggressive increase signals a stronger-than-expected response to escalating inflation concerns.
The central bank cited inflation as being significantly above earlier forecasts, with consumer expectations for inflation continuing to rise. According to the bank, this persistent demand has outpaced the country's ability to increase the supply of goods and services, contributing to a greater imbalance that fuels price increases. This ongoing excess in demand reflects pressures that require further intervention to stabilize prices.
Looking forward, the Bank of Russia has set a target to bring annual inflation down to a range of 4.5 percent to 5 percent by 2025, and ultimately to 4 percent by 2026. The bank aims to maintain inflation at this target level over the longer term, underscoring its commitment to reining in inflation and fostering a more balanced economy.
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