MOSCOW: Russia’s central bank is set to hike its key interest rate from 6.75% at its Oct 22 meeting, deputy governor Alexei Zabotkin signalled on Wednesday, as the bank prepares to raise its forecast for inflation, which remains well above the 4% target.
The central bank has raised its key interest rate five times this year as inflation, its main area of responsibility, spiked to near 7.3%, a level last seen in mid-2016, stoked by the weak rouble and globally rising food prices.
The surge in energy costs in Europe pose extra risks for prices in Russia due to so-called “imported inflation”, Zabotkin told a media briefing.
Zabotkin said the central bank would raise its key rate to rein in inflation, adding that the September board meeting signals were still relevant.
In September, the bank increased the key rate by 25 basis points to 6.75% and said it “holds open the prospect of further key rate rises at its upcoming meetings”.
“The key rate will follow a trajectory that will return inflation to 4%, the key rate will be raised as much as is necessary to achieve this goal,” Zabotkin said.
“We do not intend to give markets any additional signals today,” he said, adding that the key rate will not reach double-digit levels.
Zabotkin’s message underpinned an earlier statement from the central bank’s monetary policy chief, Kirill Tremasov, who said it was early to say the rate hiking cycle was over.
Last week, a Reuters poll predicted Russia would raise its key rate to at least 7% this month.
On Oct 22, the bank will also raise this year’s inflation forecast from 5.7% to 6.2% and will review other economic forecasts, including the trajectory of its key rate, Zabotkin said.Inflation is set to decline next year thanks to the bank’s tighter monetary policy, Zabotkin said.The central bank, which had expected inflation to slow to 4% to 4.5% in late 2022, said on Wednesday it would study the grounds for lowering the 4% target.
It pointed to other countries with a lower target. — Reuters