MOSCOW, September 13. /TASS/. The Bank of Russia raised the key rate by 100 basis points to 19% per annum and indicated the possibility of raising the figure once again at the next meeting, according to a press release following the meeting of the regulator's Board of Directors.
"On 13 September 2024, the Bank of Russia Board of Directors decided to increase the key rate by 100 basis points to 19.00% per annum. Current inflationary pressures remain high. By the end of 2024, annual inflation is likely to exceed the July forecast range of 6.5 - 7%. Growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services. Further tightening of monetary policy is required to resume the disinflation process, reduce inflation expectations, and ensure the return of inflation to the target in 2025. The Bank of Russia holds open the prospect of increasing the key rate at its upcoming meeting," the report said.
At the same time, operational indicators and GDP data for the Q2 of 2024 indicate a slight slowdown in Russian economic growth mainly due to rising constraints on the supply side and a declining external demand, the Bank of Russia said.
"GDP data for Q2 2024 and high-frequency indicators in July - August show that the growth of the Russian economy slowed down slightly. This deceleration was probably caused not primarily by a cooling of domestic demand but by an increase in supply-side constraints and softening external demand. This is evidenced by high current inflationary pressures. The upward deviation of the Russian economy from a balanced growth path is still significant," the report said.
According to the Bank of Russia, the balance of inflation risks over the medium term has shifted significantly toward pro-inflationary ones. "Over the medium-term horizon, the balance of inflation risks is significantly tilted to the upside. Pro-inflationary risks associated with the deterioration of foreign trade conditions increased. There are still risks associated with the persistently high inflation expectations and the upward deviation of the Russian economy from a balanced growth path. Disinflationary risks are primarily related to a faster slowdown in domestic demand growth than expected in the baseline scenario," the report said.
The Bank of Russia Board of Directors will hold its next meeting on the key rate on October 25, 2024.