The Bank of Russia has explained its decision to raise the key rate in increments of 1 percentage point to 9.5% per annum.
According to Report, the regulator noted that inflation is growing above forecasts, and inflation expectations of the population are not decreasing yet.
"The monetary policy pursued by the Bank of Russia is aimed at returning inflation to 4%," a press release from the Central Bank states.
The annual inflation increased to 8.7% in January (after 8.4% in December 2021) and as of February 4, it was 8.8%.
The regulator raised its inflation forecast. According to the forecast, taking into account the ongoing monetary policy, annual inflation will decrease to 5.0–6.0% in 2022, and return to the target in mid-2023. In the future, annual inflation will be close to 4%. Earlier, the CB predicted a price increase of 4-4.5% in 2022. Annual inflation, according to the CB, will be 6.8-7.7% in 2022.
As the Bank of Russia pointed out, in the fourth quarter of 2021, the Russian economy noticeably deviated upwards from the trajectory of balanced growth.
According to the updated baseline forecast, GDP growth in 2022 will be 2.0-3.0%. In 2023, the Russian economy, according to the forecast of the Bank of Russia, will grow by 1.5-2.5%, in 2024 - by 2.0-3.0%. This assumes that the Russian economy will return to a balanced growth path by the end of 2023 and continue to develop at a pace consistent with its potential.
The CB allowed a further increase in the key rate at the next meetings of the Board of Directors in 2022, the rate will be in the range of 9-11% per annum.