MOSCOW, October 25. /TASS/. The Bank of Russia sharply raised the key rate by 2 percentage points (p.p.) to a record level of 21% per annum and did not rule out the possibility of its further increase at the next meeting, the regulator said in its press release after the meeting of the Board of Directors.
"On October 25, 2024, the Bank of Russia Board of Directors decided to increase the key rate by 200 basis points to 21.00% per annum. Inflation is running considerably above the Bank of Russia’s July forecast. Inflation expectations continue to increase. Growth in domestic demand is significantly outstripping the capabilities to expand the supply of goods and services. Additional fiscal spending and the related expansion of the federal budget deficit in 2024 have proinflationary effects. Further tightening of monetary policy is required to ensure the return of inflation to the target and reduce inflation expectations," the report said.
The Bank of Russia also raised its forecast for the average key rate for 2024-2026. From October 28 to the end of 2024, the regulator expects the average key rate to be in the range of 21-21.3%. The forecast for the average key rate to the end of 2024 has been raised to 17.5% from 16.9-17.4%, for 2025 - to 17-20% from 14-16%, for 2026 - to 12-13% from 10-11%. For 2027, the Bank of Russia maintained the forecast for the average key rate at 7.5-8.5%.
"A return of inflation to the target and its stabilization close to 4% will require a much higher medium-term key rate path than forecast in July," the report said.
The Bank of Russia also raised its inflation forecast for 2024 from 6.5-7% to 8-8.5%. "According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 4.5-5.0% in 2025, 4.0% in 2026, and stay at the target further on," the report said, adding that "annual inflation equalled 8.4% and is expected to be in the range of 8.0-8.5% by the end of 2024."
Unemployment in Russia remains at historic lows, while wage growth continues to outpace productivity growth. "The labor market remains tight. Unemployment is still at its record low. The labor shortage is growing in many industries. Rising wages continue to outpace growth in labor productivity," the regulator said.
In addition, the Bank of Russia lowered its forecast for the price of Brent oil in 2024 to $80 from $85 per barrel, and kept it at $80 per barrel in 2025. The forecast for 2026 was kept at $75 per barrel, and for 2027 - $70 per barrel.
The Bank of Russia Board of Directors will hold its next key rate meeting on December 20, 2024.