YEREVAN, 12 August. /ARKA/. The Bank of Russia may raise the key rate to 20% if doubts remain that inflation is slowing down, Central Bank Deputy Chairman Alexei Zabotkin said, according to Finmarket.
“If in the coming months we will still have doubts that inflation is slowing down, and inflation expectations of citizens and businesses are declining sufficiently and at a sufficient rate so that in 2025 we again have inflation of 4%,” Zabotkin said in an interview with Rossiyskaya Gazeta.
In addition, he said, the rate could be raised in case of “additional pro-inflationary risks,’ for example, in case of a significant deterioration in external conditions, a drop in exports or a reduction in import opportunities.”
Zabotkin also explained why inflation is not slowing down, although the Central Bank started raising the key rate a year ago.
“The slowdown is happening gradually. It takes considerable time for the new level of interest rates to affect the decisions of consumers and businesses, credit and demand, and as a result – inflation. That timeframe is three to six quarters. Therefore, the main effect of our earlier decisions will fully manifest itself in the second half of 2024 and beyond,” said the deputy chairman of the Central Bank.
Zabotkin added that it will be appropriate to discuss in more detail the timing of the start of the key rate reduction only when the possibility of its further increase is completely removed from the agenda.
“For now, as you can judge from the CB’s Board’s signal, it is premature to talk about it,” he stressed.
On July 26 Russia’s central bank raised its key interest rate by 200 basis points to 18 percent, promising further tightening to fight surging inflation. The hike brought the cost of borrowing to its highest level in more than two years.-0-
