CBR again signals possible rate hike at next board meeting

VLADIVOSTOK. June 28 (Interfax) - The Central Bank of Russia's (CBR) indication after its June 9 board meeting on monetary policy that the key interest rate, which has remained at 7.5% since last September, might be raised in July still stands.

"The period of an unchanging key rate, at 7.5%, has lasted since September of last year. In the context of recent years this is a fairly long period that it remains unchanged. The rate over this period corresponded to our understanding, including our forecast, of what is required to stabilize inflation near 4% [...]. And so far data have confirmed this," CBR deputy governor Alexei Zabotkin told reporters in Vladivostok.

"But we see that the balance of risks has shifted to a large extent toward pro-inflationary. We're seeing an increase, expansion of domestic demand, both from the private sector and from the state sector, the acceleration of lending in recent months. And therefore at the upcoming meeting the Bank of Russia's board does not rule out the possibility of raising the key rate," Zabotkin said.

At the June 9 meeting, the CBR board left the rate at 7.5% as expected, although it considered hiking it by 25 to 75 basis points. However, after the meeting the CBR gave a more hawkish signal regarding possible future rate hikes given increasing pro-inflationary risks.