Full Percentage Point Russian Central Bank Rate Hike… More Tightening Promised
July 21, 2023
A full percentage point hike in the Central Bank of Russia’s overnight interest rate to 8.5% was twice as large as markets anticipated, and the action was accompanied by a hawkish statement that depicted the move as the first of multiple increases that will follow in the months ahead. Labor market shortages resulting from President Putin’s expensive war and previous ruble depreciation magnified proinflationary risks significantly within the past month, prompting central bank officials to revised the projected CPI inflation path upward to as much as 6.5% around the end of 2023. To restore balance in Russian supply and demand, a tighter monetary policy is required. At 8.5%, the interest rate is back at its level at the start of February 2022, the month that Putin launched military aggression against Ukraine. In two moves, the interest rate catapulted to 20.0% by the end of that month but held there only very briefly. Three 300-basis point cuts followed by late May 2022 and the final reduction to 7.5% was made last September.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Russia
ShareThis
