Associated media – Linked media
On June 9, 2024, Russia’s central bank increased its key interest rate by 200 basis points to 21%, responding to a sharp rise in consumer prices and ongoing inflation risks. This decision follows a previous rate hike in September, which brought the rate to 19%.
The move surpassed analysts’ expectations of a 100 basis point increase, marking the highest rate since early 2003. The last comparable rate was in February 2022, shortly after Russia’s invasion of Ukraine, when the rate was raised to stabilize markets.
Central Bank Governor Elvira Nabiullina acknowledged the possibility of further rate hikes, with discussions about potentially exceeding 21% at the next meeting in December. This reflects concerns over rising inflation, which averaged 9.8% in September, up from 7.5% in August. The bank now anticipates inflation will settle between 8.0-8.5% by the end of 2024, significantly higher than the previous forecast.
The bank highlighted persistent inflation risks due to high expectations and economic imbalances, alongside worsening foreign trade conditions. It predicts inflation will decline to 4.5-5.0% in 2025 and 4.0% in 2026.
Russia’s economy faces challenges from low global oil prices and Western sanctions, which have impacted trade and contributed to the ruble’s depreciation. The US dollar rose 0.36% against the ruble as of 12:52 pm London time.
These interest rate hikes contrast with the monetary easing approaches of the European Central Bank and the US Federal Reserve, raising concerns about potential constraints on Russia’s economic growth.
The International Monetary Fund projects Russian inflation to average 7.9% this year. In its October World Economic Outlook, the IMF noted that Russia’s GDP is expected to drop from 3.6% this year to 1.3% in 2025, due to slowing private consumption and investment amid less rigid labor markets and slower wage growth.
Connected media – Associated media