The Bank of Russia has decided to maintain the key interest rate at 21% per annum, according to Governor Elvira Nabiullina. This decision aims to ensure a slowdown in inflation over the coming quarters, following tighter monetary conditions than previously anticipated. "Tight monetary conditions that have formed in the economy are to ensure a slowdown of inflation in the next few quarters," Nabiullina stated.
Since October, lending growth has slowed significantly due to regulatory measures taken by the Bank of Russia. These measures were designed to enhance banks' financial resilience and prevent excessive risk accumulation. As a result, banks have been adjusting their capital and liquidity strategies with more caution.
Nabiullina explained that while domestic demand remains high, signs of cooling are evident in certain sectors such as construction and metallurgy. Additionally, there is an active reallocation of workers across industries experiencing labor shortages.
Inflation has accelerated recently due to temporary factors like adverse weather affecting crop yields and rising tariffs in telecommunications and transportation. High inflation expectations continue to exert pressure on prices, driven by past price dynamics and a weakening ruble.
Looking ahead, Nabiullina highlighted pro-inflationary risks related to persistent high inflation expectations and labor market constraints. On the other hand, a more substantial deceleration in lending growth could serve as a disinflationary factor.
The central bank will assess whether current monetary conditions remain sufficiently tight or if further key rate increases are necessary if demand continues overheating. The main objective remains achieving price stability within a reasonable timeframe.