Russia’s central bank raised its key interest rate to 5% today | RussiaGate #Digest

Russia’s central bank raised its key interest rate to 5% today.

On 19 March 2021, the Bank of Russia Board of Directors decided to increase the key rate by 25 b.p. to 4.50%. The further hike was looking inevitable in the face of the growing inflation and American sanctions, but Russian business and experts expected a moderate 25 b.p. increase.

The Bank of Russia decided otherwise. The regulator stated in its official press release that the inflation is still well above not only its initial forecast of 4%, but also exceeds the latest forecast of 4.7-5.2%: annual consumer price growth rate rose to 5.8% in March.

The regulator believes that the inflation will return to its target of 4% by the middle of 2022. It is nothing but a wishful thinking. Today’s increase of the key rate by 50 b.p. will certainly take a heavy toll on the economic activities in Russia. It might as well be not the final hike of the key rate this year.