The Central Bank sharply raised the key bet on 0.75 percentage points – 7.5 to percent per annum, follows from the message on the regulator website.
The current increase was sixth in a row since March, when the rate was at the lowest in the modern history of Russia – 4.25 percent per annum. At the March meeting was completed in the summer of 2019 cycle of mitigation of monetary policy. The current level is the highest since 2018.
Most economists predicted raising rates by 0.5 percentage points. They justified their assumptions to the need for reaction to the rise in prices, which has recently been recorded in many categories of goods and services.
General consumer inflation in September accelerated from 6.7 to 7.4 percent compared to the same period last year. Food goods rose 9.2 percent, non-food – by eight percent. At the same time, the Central Bank is focused on the target inflation rate (the so-called target) four percent of the per annum, and the key rate (along with the mandatory bank reservation standard) is one of the main instruments of monetary policy.
In mid-September, the head of the Central Bank Elvira Nabiullina said that the September inflation rates would become peaks this year and can achieve seven percent per annum. As a result, its forecast did not come true. The September forecast of the Ministry of Economic Development assumed the rise in prices by 5.8 percent in the results of 2021. However, it was subsequently worse to 7.4 percent.
In early October, the head of the monetary policy department of the Central Bank Cyril Tremasov rejected the idea of reducing the key rate in the foreseeable future. According to him, inflation in Russia “moves above the upper boundary.”
In turn, domestic banks have already begun to raise rates on deposits, without waiting for the decision of the Central Bank. The average maximum profitability on deposits in the 10 largest banks of the country, according to the Central Bank, in the first third of October amounted to 6.43 percent. At the same time, real yield – with amendment for inflation – still remains close to zero or negative, and therefore analysts do not expect the influx of depositors to banks.