Central Bank of Russia Sensationally Hiked Rate by 200 b.p. to 21 Percent Hoping to Beat Inflation Exclusively through Exorbitant Monetary Tightening

The Bank of Russia, CBR, profoundly raised its key interest rate by a whopping 200 b.p. — from 19% to 21%. This is an absolute record since February 2022 (20%). Moreover, the Central Bank of Russia raised its forecast for the average key rate for 2024 to 17.5 from 16.9—17.4%, and pointed out to its expectations to see it in the range of 21—21.3% by the end of this year. The Russian financial regulator did not rule out further tightening of monetary policy due to the projected level of annual inflation above the 4% target and the July forecast (6 — 6.5%) and pro-inflationary risks: accelerated lending and low unemployment (2.4%) — saying not a single word about the massively growing M2 aggregate YoY.

According to its press release, CBR believes that the fiscal policy tightening will eventually reduce inflation. In September 2024, seasonally adjusted CPI rose to 9.8% on an annualized basis, after 7.5% in August, according to the regulator. The same measure of core inflation rose to 9.1%, after 7.7% measured in August 2024.