MOSCOW, October 27. /TASS/. The Bank of Russia raised the key rate by 2 percentage points (pp) to 15% per annum, indicating a significant increase in current inflation pressure, the regulator said in a press release on Friday.

"On 27 October 2023, the Bank of Russia Board of Directors decided to increase the key rate by 200 basis points to 15.00% per annum. Current inflationary pressures have significantly increased to a level above the Bank of Russia’s expectations. Steadily rising domestic demand is increasingly exceeding the capabilities to expand the production of goods and the provision of services. Inflation expectations remain elevated," the regulator said.

The regulator also raised its inflation forecast for 2023 to 7-7.5% from 6-7% and adjusted it for 2024, expecting inflation in the range of 4-4.5%. "In its further key rate decision-making, the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon, as well as the risks posed by domestic and external conditions and the reaction of financial markets. According to the updated forecast of the Bank of Russia, annual inflation will range from 7.0 to 7.5% in 2023. Given the current monetary policy stance, annual inflation will decline to 4.0-4.5% in 2024 and stay close to 4% further on," the statement said.

The Bank of Russia changed the forecast for the average key rate for 2023-2026 - by the end of 2023, the regulator expects it to be reach the level of 15.0-15.2%.

In addition, the Bank of Russia raised its forecast for the average key rate for 2023 to 9.9% from 9.6-9.7%. For 2024, the forecast was also adjusted to 12.5-14.5% from 11.5-12.5%. In 2025, the regulator expects the average key rate to reach 7-9% (previously 7-8%), in 2026 - 6-7% (previously 5.5-6.5%).

The regulator believes it is necessary to ensure additional tightening of monetary policy to limit the scale of inflation deviation upward from the target. "The updated medium-term parameters of fiscal policy assume a slower than expected decline in fiscal stimulus in the years ahead. Therefore, it is required to additionally tighten monetary policy to limit the upward deviation of inflation from target and return it to 4% in 2024. The return of inflation to target and its further stabilization close to 4% also means that tight monetary conditions will be maintained in the economy for a long period," the regulator said.

The inflation forecast for 2023 was raised to 7-7.5% from 6-7%. In 2024, the figure is expected to be in the range of 4-4.5% and will remain close to 4% in the future.

The regulator also raised its forecast for the price of Brent oil for 2023-2026. Thus, the forecast for 2023 was raised to $83 from $60 per barrel, for 2024 - to $80 from $60 per barrel, for 2025 - to $75 from $55 per barrel, for 2026 - to $70 from $55 per barrel.

The Bank of Russia Board of Directors will hold its next key rate review meeting on December 15, 2023.