Central Bank of Russia Hints of Coming Interest Rate Hike

April 26, 2019

Officials at the Central Bank of the Russian Federation left the one-week repo rate unchanged at 7.75% for a third straight policy review. Such had been raised by 25 basis points each last September and December. But a released statement expressed confidence that a nascent upturn in inflation was nipped early by those tightenings and that it may be possible to cut rates by the middle quarters of this year.

 Short-term proinflationary risks have abated. The Bank of Russia’s decisions to raise the key rate made in September and December 2018 were sufficient to curb the effects of one-off proinflationary factors. According to the Bank of Russia’s forecast, annual inflation will return to 4% in the first half of 2020.

In its key rate decision-making, the Bank of Russia will take into account inflation and economic dynamics against the forecast, as well as risks posed by external conditions and the reaction of financial markets. If the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of turning to cutting the key rate in Q2-Q3 2019.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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