Russia’s central bank raised its key interest rate by 200 basis points to 18%, the highest in over two years, to combat rising inflation in an overheated economy, Reuters reports.
The hike was anticipated by market analysts, though some Russian elites criticized it for potentially hindering economic growth. The bank highlighted the need for further tightening to reduce inflation, which hit 9.0% in July, up from 8.6% in June. The bank revised its 2024 inflation forecast to 6.5–7.0%, well above the 4% target, and aims for 4.0–4.5% inflation by 2025.
Central Bank governor Elvira Nabiullina noted the economy’s substantial overheating and dismissed suggestions to adopt China’s easing measures, citing different economic conditions. The bank acknowledged underestimating the impact of budget spending on inflation and pointed to labor shortages and increased lending as contributing factors. The central bank also revised its 2024 GDP growth forecast to 3.5%-4.0%.
