Bank of Russia raises key interest rate to 15%

On 27 October 2023, the Board of Directors of the Bank of Russia decided to increase the key interest rate by 200 basis points to 15.00% per annum. This decision was influenced by increasing inflationary pressures, which exceeded the expectations of the Bank of Russia. Domestic demand is growing steadily, exceeding the possibilities to expand the production of products and services. Inflation expectations remain high and credit growth remains strong. The new medium-term fiscal policy framework also suggests that the decline in fiscal stimulus will be slower than previously thought. In this context, tighter monetary policy is needed to reduce the risk of inflation deviating from the target and returning to 4% by 2024. To achieve this target, tight monetary conditions in the economy need to be maintained for a long time.

The Bank of Russia will continue to make decisions on the key interest rate, taking into account the actual and expected dynamics of inflation, the state of the economy over the forecast horizon, the assessment of risks associated with domestic and external conditions and the reaction of financial markets to them. According to the Bank of Russia's updated forecasts, annual inflation is expected to be between 7.0% and 7.5% by the end of 2023. Thanks to the monetary policy, annual inflation is expected to decline to between 4.0 per cent and 4.5 per cent by 2024 and remain close to 4 per cent in the long term.