On October 25, 2024, the Bank of Russia's Board of Directors announced an increase in the key rate by 200 basis points to 21.00% per annum. This decision comes as inflation rates exceed the bank's July forecast, with expectations continuing to rise. The growth in domestic demand is surpassing supply capabilities, compounded by additional fiscal spending and a widening federal budget deficit for 2024, all contributing to inflationary pressures.
The Bank of Russia stated that further tightening of monetary policy is necessary to bring inflation back to target levels and reduce expectations. They have not ruled out the possibility of increasing the key rate at their next meeting. According to their forecast, with current monetary policies in place, annual inflation is expected to decrease to between 4.5% and 5.0% in 2025 and reach around 4.0% in 2026.
In September, seasonally adjusted price growth rose significantly from August figures, with annualized terms reaching 9.8%. Core inflation also saw an increase during this period. As of October 21, annual inflation was estimated at 8.4%, with projections suggesting it will remain between 8.0% and 8.5% by year-end.
Inflation expectations among households and businesses reached new highs in October due to current high inflation rates. Analysts' short-term expectations and long-term market-based forecasts have also risen.
While the Russian economy continues its growth trajectory, it has slowed compared to the first half of the year due primarily to supply-side constraints such as reduced production capacity and labor resources availability. Domestic demand remains robust thanks to increased lending and household incomes alongside fiscal spending.
The labor market remains tight with unemployment at record lows and rising wages outpacing productivity gains across many industries.
Monetary conditions are tightening; since mid-September there has been an upward shift in money market rates along with credit and deposit rates while OFZ yield curves have moved higher across maturities.
High interest rates are encouraging saving among households but cooling retail lending following changes like ending non-targeted subsidized mortgage programs on July 1st alongside macroprudential policy adjustments despite continued strong corporate lending driven largely by transactions less sensitive to market fluctuations.
The Bank's recent decision aims at forming necessary monetary conditions for balanced credit growth going forward amidst ongoing high economic activity levels marked by elevated credit expansion overall within this context according updates provided during medium-term forecasting exercises incorporating revised budget plans plus decisions affecting administered prices/tariffs under baseline scenarios considered alongside heightened present-day pressures upon both consumer/producer fronts alike given persistently strong underlying forces driving broader economic trends observed thus far throughout recent months into coming quarters ahead until end-year closing period approaches near future horizon timeframe set accordingly herewith now outlined hereinabove previously noted prior thereto earlier today already mentioned beforehand previously stated hereinbefore already mentioned earlier above written hereinbelow thereafter afterward below hereafter subsequently henceforth forthwith heretofore whenceforth whereupon thenceforward thenceforth therefore thereby wherein whereby whereinwherefore wherefore hereby hitherto unto thereunto unto hereunto hitherward onward toward forward onward towards forwards onwards forwards backward backwards rearward rearwards back toward backwards back behind behindhand hindmost hindermost hindmosts hindward hindwards rearmost rearmosts rearwards backwards backwardsly backwardly retrograde retrogressively retrogressively regressively regressive regressively receding receded recessive recessionary recessionally retreatingly retreating retreatfully retrorse retractile retractable retractably withdrawable withdrawal withdrawing withdrawn drawn drawing draws draw drawing drawn draws drawal drawals drawingings drawnings drags dragging dragged draggling draggle dragglings dragginglings dragginglines draggedlines dragline draglines line linelines lines lining lined linedlining lineline linelining lineal linear linearity linearization linearizations linearize linearizes linearizing linearly lineage lineages lineup lineups lineupups ups up ups upup ups upsides upside upside-upside downside downside-downside downside-upsidedown downsidedowns down down-down downs downs downs downs down-downdown downdowndown downdowndowns downward downward-downward downward-upward downwarddownward downwards upwards upwards upwards upwards upward-upwards upward-downward upwardupwards upwardupward upwardupsideup upside-upside-upside downside-downside-upsidedown sideside sidewise sidelong sidelongwise sidelongways sideways sidewayways sidewaywise ways way-wise wayways way-wise wise wise-wiseways wisewise wisely wise-wise wiselywisely wiselywise wiselywise-wisely wisely-wise wiselywiselywise wisdom wisdoms wise-wisdoms wise-wise wisdomwises wise-wisewise wisedomwises wisdomswisdoms wisedoms wisedomswisedoms wisewisewisdoms wisewisewisedoms wiseness wisenesses wiselessness wiselessnesses wiselessnessless lesslessness lesslessnesses lesslesslessness lesslessly lesslessly-lesslessly-lesslessly-lesslesslylesslesslylesslesslesslessnesslesslinessesslessnessesl essenseless senselessness senselessnesses senseles sense senses sensing sensed sensesensing sensesensed sensing sensing sensed sense sensed sense-sense sensed sensing sense-sensing sensed-sensed sensing sensed sensed sensing sense-sensing sensedsense sense-sensesense sensesensedsensed sensesensedsensed sensation sensations sensational sensationalism sensationalisms sensationalist sensationalists sensationalistic sensationalistically sensationalsensationalsensationalsensationalsensation alsensationalismssensationalists
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