[Regnum] The Central Bank of the Russian Federation may raise the key rate to 20% per annum and higher if inflation does not slow down. Deputy Chairman of the Bank of Russia Alexey Zabotkin said this in an interview with Rossiyskaya Gazeta on August 11.
He explained that the regulator will make the appropriate decision if it still has doubts about the reduction of inflation expectations of the population and business at a sufficient speed so that inflation will again be 4% next year.
“Or if additional inflationary risks are realized, for example, a significant deterioration in external conditions, a drop in our exports, or a reduction in the ability to receive imports,” added Zabotkin.
He stressed that the main task of the Bank of Russia is to achieve low inflation across a wide range of consumer goods and services. The Deputy Chairman of the Central Bank explained that the effect of the decisions taken does not manifest itself immediately; it will be fully visible no earlier than the second half of the year.
As reported by Regnum News Agency, on July 26, the Bank of Russia raised the key rate for the first time since December 2023 — from 16 to 18%. The rate of inflation has increased, and its level is higher than that envisaged in the forecast for April 2024, the regulator noted. For inflation to begin to decline again, additional tightening of monetary policy is required, the Central Bank emphasized.
On July 26, the Chairman of the Bank of Russia Elvira Nabiullina said that in the first six months of 2024, the Russian economy experienced overheating, which was the highest in the last 16 years. According to her, the Russian economy was overheated more severely only before the 2008 crisis, which at that time exacerbated the depth of the economic downturn, which was largely caused by external factors.
Nabiullina said on July 30 that high inflation in the economy, like a high temperature in humans, indicates health problems. She noted that the Central Bank is raising the key rate in order to cool "excessive, inflationary demand" and return inflation to target levels.
The Bank of Russia expects a significant slowdown in inflation in the second half of this year. Next year, according to the regulator's forecasts, inflation will decrease to 4.0-4.5% and will consolidate near 4% in the future.