MOSCOW, December 15. /TASS/. The board of directors of the Bank of Russia raised its key rate from 15% to 16% per annum at this year’s last meeting, noting that the return of inflation to target in 2024 assume that tight monetary conditions will be maintained in the economy for a long period.

"On 15 December 2023, the Bank of Russia Board of Directors decided to increase the key rate by 100 basis points to 16.00% per annum. Current inflationary pressures remain high. Households’ and businesses’ inflation expectations have increased. The return of inflation to target in 2024 and its further stabilization close to 4% assume that tight monetary conditions will be maintained in the economy for a long period," the regulator said in a statement.

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 developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets, according to the statement.

Russia’s GDP growth will exceed 3% by the end of this year, the Central Bank said, adding that economic activity is increasing much faster than it expected in October. In its October macroeconomic forecast the Bank of Russia projected GDP growth by 2.2-2.7% for 2023.

"GDP growth in 2023 Q3 and recent monthly data for 2023 Q4 show that economic activity is increasing much faster than the Bank of Russia expected in October. This suggests that the upward deviation of the Russian economy from a balanced growth path in 2023 H2 has proved to be more substantial. This is evidenced by current price growth rates. The Bank of Russia expects GDP growth in 2023 to outperform its October forecast and exceed 3%," the statement reads.

The Bank of Russia also maintained its inflation forecast for 2023 at 7-7.5%, expecting it close to the upper bound of the range, the regulator said. "As of 11 December, annual inflation was down to 7.1% from 7.5% in November, which was due to the high base effect of early December 2022, when utility tariffs saw an unscheduled indexation. Annual inflation for 2023 is expected to be close to the upper bound of the 7.0-7.5% forecast range," the statement reads.

According to the forecast of the Bank of Russia, given the monetary policy stance, annual inflation will decline to 4.0-4.5% in 2024 and stay close to 4% further on.