Russian Central Bank May Raise Interest Rates Above 20%

Moscow, August 11 (FFN) – The key interest rate in Russia could rise above 20% in the coming months if the central bank continues to have doubts about the projected inflation trajectory. This was stated by Alexei Zabotkin, Deputy Governor of the Bank of Russia, as reported by the TASS news agency.

Zabotkin noted that if the central bank remains uncertain that “inflation is slowing and consumer and business inflation expectations are declining sufficiently to bring inflation back to 4% by 2025,” the key interest rate could be increased to 20% or even higher. He added that the impact of changes in interest rates on consumer and business decisions takes some time to manifest, which in turn affects inflation trends.

“It takes between three and six quarters. This means that the strongest impact of decisions made so far will be felt in the second half of this year and beyond,” Zabotkin said.

The risk of further interest rate hikes has recently been amplified by data from Russia’s statistical office, Rosstat, on inflation developments. In July, inflation reached its highest level in nearly a year and a half, surpassing 9%.

Consumer prices in Russia rose by 9.1% year-over-year, Rosstat reported on Friday (August 9). This marks an increase from 8.6% in the previous month. The July year-over-year inflation rate was the highest since February 2023.

The Central Bank of Russia last met at the end of July, where it raised the key interest rate to 18%, a 200 basis point increase, marking the highest level since the end of February 2022. At that time, the central bank raised the rate from 9.5% to 20% shortly after Russia’s attack on Ukraine.

Key Interest Rates in Russia

Year-Over-Year Inflation in Russia