(Teleborsa) – The Central Bank of Russia has raised the benchmark rates by 25 basis points, thus bringing the cost of money at 6.75%. The increase was less than most analysts expected, but represents the fifth consecutive increase (an increase of 250 basis points has been recorded since the beginning of the year). The Bank of Russia continues to report too high inflation and sees further possible rate hikes in upcoming meetings.
The central bank notes that the contribution of the factors driving up inflation remains considerable, “in the wake of a faster growth in demand than the capacity to expand production”. In this context, “the balance of inflation risks is skewed to the upside“. This may lead to a more sustained deviation of inflation from the target of 4% increase in consumer prices. “If the situation develops in line with basic forecasts, the Bank of Russia is keeping open the prospect of further hikes in key rates at its next meetings,” he said.
According to the forecasts of the Bank of Russia, annual inflation will start to slow in the fourth quarter of 2021. Given the stance of monetary policy, annual inflation will drop to 4-4.5% in 2022 and remain close to 4%. In August, monthly growth in consumer prices started to rise again, following the slowdown in July. Annual inflation rose to 6.68% (vs 6.46% in July).
As regards the growth of the country, it is reported that “the Russian economy reached its pre-pandemic level in the second quarter of 2021. Estimates suggest that economic activity continued to grow in the third quarter, albeit at a somewhat slower pace ”.
The general message is “still relatively hawkishPiotr Matys, senior currency analyst at InTouch Capital Markets, told Bloomberg. “The scale of today’s move implies that the central bank is perhaps one more rate hike from reaching the end of its tightening cycle after taking decisive action over the summer to curb inflation,” he added.