Russia cuts key interest rate to 14%, says inflation could hit 23% this year
*In the aftermath of Russia’s invasion of Ukraine and the ensuing unprecedented Western sanctions, the central bank is juggling a sharply shrinking economy and skyrocketing inflation
*Russian inflation reached 16.7% in March and the bank said on Friday that it expects annual inflation of between 18% and 23% this year.
The Central Bank of Russia has cut its key interest rate to 14% from 17% as it looks to mitigate the impact of international economic sanctions.
In the aftermath of Russia’s invasion of Ukraine and the ensuing unprecedented Western sanctions, the central bank is juggling a sharply shrinking economy and skyrocketing inflation. Economists expect a double-digit contraction for the economy, and inflation in excess of 20% in 2022.
Russian inflation reached 17.6% as of April 22 and the central bank said on Friday that it expects annual inflation of between 18% and 23% this year, before slowing to between 5% and 7% in 2023 and returning to its 4% target in 2024.
The central bank implemented an emergency hike of the key rate from 9.5% to 20% in February, days after the invasion of Ukraine, in a bid to support its plunging ruble currency.
However, with the ruble now returning to pre-war levels, policymakers are turning their attention to recalibrating the economy in an effort to absorb the impact of punitive sanctions from international powers. The bank said its inflation outlook is set to be impacted by the future of its imports and exports, as it looks to navigate the stinging sanctions, along with future fiscal policy decisions.
It added that it will “take into the account the need for a structural transformation of the economy and will ensure a return of inflation to target in 2024.”
The CBR estimates that economic activity began to decline in March, as sanctions began to take effect, with high-frequency data indicating a slide in consumer and business activity.
https://www.cnbc.com/2022/04/29/russia-cuts-key-interest-rate-to-14percent-says-inflation-could-hit-23percent-this-year.html