MOSCOW, August 31. /TASS/. After a dramatic climb to 12% per annum, the Bank of Russia's key rate will not be cut for a long time, according to Deputy President - Chairman of VTB Management Board Dmitry Pyanov.

"Our analysts and we believe that, unless something extraordinary happens, the key rate will not be reduced before the middle of 2024. We believe that this period with 12% is comparable to the period of 2015, when there was a period when the key rate was 11% per annum," he said.

Pyanov stated that economic agents take a different approach, believing that the key rate would soon fall, and do not change proposals for financial products, which could lead to regulatory tightening. "Many market participants believe that this increase in the key rate, based on March 2022 or December 2014 experience, is short-term, because this increase resembles an emergency, that is, seems atypical. Many market participants anticipate a swift stabilization and a reduction in the key rate. This can be seen in OFZ yields, which are consistently below 12%. This indicates that economic agents believe the 12% figure will not persist long. We believe that this expectation is not justified," he added.

The Bank of Russia earlier decided to raise the key rate to 12% from 8.5% per annum at an extraordinary meeting of the Board of Directors. "The Bank of Russia Board of Directors decided to increase the key rate by 350 basis points to 12% per annum from 15 August 2023. The decision is aimed at limiting price stability risks," the statement said.

"Moving forward, in its key rate decision-making the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as the risks posed by domestic and external conditions and the reaction of financial markets. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will return to 4% in 2024," the regulator added.

The Bank of Russia noted, "Hereinafter, with current price growth rates staying at the attained levels the risk of inflation’s deviation upwards from the target in 2024 is substantial. The Bank of Russia’s decision is aimed at shaping monetary conditions and overall domestic demand dynamics necessary to bring inflation back to 4% in 2024 and stabilize it close to 4% further on."

The next meeting of the Bank of Russia's Board of Directors on the key rate level, is scheduled for September 15, 2023.