Russia Interest Rate2023 Data - 2003-2022 Historical - 2024 Forecast - Calendar

The Central Bank of Russia raised its key interest rate by 350bps to 12% on August 15, 2023, the highest level since April 2022 and said inflationary pressure is building up. On Monday, the ruble tumbled past the 102 level, with President Putin's economic adviser Maxim Oreshkin blaming a loose monetary policy for a plunging currency. As of 7 August, the annual rate of inflation rose to 4.4% while current price growth rates continue to increase. Steady growth in domestic demand surpassing the capacity to expand output amplifies the underlying inflationary pressure and has impact on the ruble’s exchange rate dynamics through elevated demand for imports. Consequently, the pass-through of the ruble’s depreciation to prices is gaining momentum and inflation expectations are on the rise. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will return to 4% in 2024.

The Central Bank of Russia raised its key interest rate by 100bps to 8.5% in its July 2023 meeting, above market expectations of a 50bps hike, and paved the way for more rate increases in incoming decisions. It was the first rate hike since September of 2022. The central bank warned that upside risks to inflation have increased significantly from the prior month, underscoring the need to destroy demand and balance it with the limited supply of goods and services in the Russian economy as the military mobilization and military-aged diaspora triggered a fresh labor crisis. The CBR also flagged higher inflationary pressure from a weakening ruble, as weak exports limited foreign exchange inflows. Inflation forecasts were revised upward to 5-6.5% by year-end before converging to 4% in 2024.

The Central Bank of Russia held its key interest rate unchanged at 7.5% for the sixth consecutive decision in its June 2023 meeting, in line with market expectations, but flagged a higher possibility of rate hikes in the upcoming meetings due to higher inflationary risks. The bank noted that inflation is due to rise as base effects from the war will start to fade, while consumer demand recovers from last year’s crash and the effects of a weaker ruble pass through. Inflationary expectations are also higher as war spending and lower energy prices spark a record-high budget deficit for the Federal government, pressuring the ruble and lifting bond yields. Additionally, production costs are higher as the military mobilization caused a crash in the labor force and pressured firms’ capacity. Policymakers also noted that economic activity has picked up at a greater pace than expected. The CBR expects inflation to hover between the 4.5-6.5% range this year before steadying at 4%.