Will the Russian Central Bank Increase the Key Rate
According to Russian media, the meeting of the Board of Directors of the Central Bank of the Russian Federation on September 14 may present a surprise in the form of an increase in the key rate.
Experts believe that this would help bring down the panic and strengthen the ruble. However, officials oppose calling this decision “extremely undesirable” and noting that such a move will lead to additional budget expenditures and reduce the competitiveness of the economy.
The next meeting of the Board of Directors of the Central Bank will be held on Friday, September 14. On it, the regulator will have to decide on the key rate. The experts interviewed by Gazeta.Ru believe that the Central Bank will not touch the rate, leaving it at 7.25%, but the option of raising it is not ruled out.
Intrigue around the rate was created by the head of the Central Bank Elvira Nabiullina. In early September, she said that there were factors in favor of raising it. In particular, inflation returns to the target level of 4% slightly faster than predicted by the regulator. In August, inflation was 3.1% in annual terms, accelerating by 0.6 percentage points compared with July. And inflation expectations for August reached 9.9%.
“Now there are a few factors that would speak for a rate cut. There are a significant number of factors that speak about the retention rate, and there are some factors that allow you to put on the table and the question of a possible increase in the rate, “- said Nabiullina.
The last meeting of the Board of Directors of the Central Bank was held on July 27. And on it, as well as at the two previous meetings, the Central Bank left the rate unchanged.
Government officials have already spoken out against the rate hike, which in part can be interpreted as interference in the affairs of an independent institution.
Speaking last week at the Moscow financial forum, the head of government, Dmitry Medvedev, said that “it is necessary to move from neutral to stimulating regulation of the lending”.
“Even despite the successes of restraining inflation that we have, rates are still quite high, and in this sense we are counting on the Bank of Russia’s active position on this issue,” the prime minister then stressed.
Presidential Assistant Andrei Belousov at the Eastern Economic Forum (WEF) stated that raising the rate “will be extremely undesirable because it will slow down investment activity and economic growth, and will lead to additional budget expenditures.”
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