CBR holds key rate at 7.5%, to assess advisability of raising it after stabilization of inflation near 4% in 2024

MOSCOW. April 28 (Interfax) - The Central Bank of Russia (CBR) Board of Directors has decided to hold the key rate at 7.5% per annum at its meeting on Friday, the regulator said in a statement on its website.

Analysts had expected the rate to be held at 7.5% and the CBR to issue a hawkish signal about the future direction of monetary policy.

The CBR said that the balance of risks to inflation has not changed significantly since the last board meeting.

Moving forward, in its key rate decision-making, the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as the risks posed by domestic and external conditions and the reaction of financial markets.

"Given gradually rising inflationary pressures, the Bank of Russia's forthcoming Board meetings will consider the necessity of key rate increase to stabilize inflation close to 4% in 2024 and further on," he said.

Current rates of price growth have increased since late 2022 and are largely about 4% on an annualized basis. Bank of Russia data show that the stable components of current price growth are so far below 4% on an annualized basis.

Current rates of price growth have increased since late 2022 but remain moderate, including in the stable components of inflation. Inflation expectations of households are down. They nevertheless remain elevated, as do businesses' price expectations. Economic activity is rising faster than the February forecast of the Bank of Russia assumed. This reflects both an expansion in domestic demand and the ongoing processes of transformation of the Russian economy. Accelerating fiscal spending, deteriorating terms of foreign trade and the situation in the labor market continue to pose pro-inflation risks, the regulator said.

According to the CBR forecast, given the monetary policy stance, annual inflation will come in at 4.5-6.5% in 2023 to return to 4% in 2024.