Central Bank of Russia holds rate at 7.5%, could raise it at next meetings
MOSCOW. June 9 (Interfax) - The Central Bank of Russia's board has for the sixth time in a row decided to keep the key rate at 7.5% per annum.
"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," the regulator said in the commentary to its decision.
Analysts expected a decision to hold the rate at 7.5% and a still hawkish signal about monetary policy going forward, but some expected the rhetoric to toughen.
"In the context of gradually rising inflationary pressures, the Bank of Russia holds open the prospect of increasing the key rate at its next meetings to stabilize inflation close to 4% in 2024 and further on," the regulator said. According to the baseline scenario, given the monetary policy stance, annual inflation will come in at 4.5-6.5% in 2023, return to 4% in 2024 and will be close to 4% further on, it said.
"Current price growth rates, including the stable indicators of inflation, continue to increase. Inflation expectations of households and businesses' price expectations remain high," it said. "Economic activity is rising faster than the Bank of Russia's April forecast assumed, which in large measure reflects a strong rebound in domestic demand," it said.
Accelerating fiscal spending, deteriorating terms of foreign trade and the situation in the labor market remain pro-inflationary risk drivers, the regulator said. The overall balance of inflation risks has tilted even more to the upside, it said.