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Russia Central Bank Keeps Key Rate Unchanged At 7.50%


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Russia’s central bank decided to keep its key interest rate unchanged for the fourth straight policy session at its March meeting as inflation expectations eased notably although they remain elevated.

The bank reiterated that a hike in the key rate would be considered at its upcoming meetings if pro-inflation risks intensify.

The Board of Directors of the Bank of Russia decided to retain the key interest rate at 7.50 percent, as widely expected.

The central bank assessed that a recovery in business and consumer activity is on-going. Accelerating fiscal spending, deteriorating terms of foreign trade and the situation in the labor market continue to pose pro-inflation risks.

Recent data showed that consumer price inflation eased to 11.0 percent in February from 11.8 percent in January.

The bank forecast annual inflation to slow to 5.0-7.0 percent in 2023, and return to 4.0 percent in 2024.

The unemployment dropped to a new low amid rising labor shortages that is hurting the production capacity.

Under these circumstances, productivity growth can lag behind real wage growth, the bank observed.

In case of a further budget deficit expansion, pro-inflation risks will rise and tighter monetary policy may be required to return inflation to target in 2024 and keep it close to 4 percent further on, the bank said in a statement.

“The statement retained the line that “if pro-inflation risks intensify, the Bank of Russia will consider the necessity of key rate increase at its upcoming meetings,”

“But with inflation pressures likely to build, we remain of the view that the CBR will deliver a 50bp interest rate hike, to 8.00 percent, in Q2,” Capital Economics economist William Jackson said.

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