Key Rate in Russia
Russia's central bank policy rates from 2013 to 2022 saw significant fluctuations, influenced by economic sanctions, oil price volatility, and inflationary pressures. Initially, rates were increased to stabilize the Ruble and control inflation. In the run-up to and during the COVID-19 pandemic, rates were reduced to support the economy. By 2022, rates were again increased in response to inflation concerns and geopolitical tensions following war in Ukraine.
The Key Rate ended 2022 at 7.50%, down from the 8.50% value at the end of the previous year and higher compared to the reading of 5.50% a decade earlier. As a reference, the average Key Rate in Eastern Europe was 8.40% at the end of 2022. For more interest rate information, visit our dedicated page.
Russia Interest Rate Chart
Russia Interest Rate Data
|Key Rate (%, eop)
|10-Year Bond Yield (%, eop)
Central Bank hikes key rate again in December
At its meeting on 15 December, the Central Bank of the Russian Federation (CBR) hiked its key policy rate by 100 basis points to 16.00%. This marked the fifth consecutive meeting where the CBR increased borrowing costs as it continued its fight against spiraling inflation. The Bank has now raised rates by 850 basis points since July, including an emergency hike in August.
The Bank’s continued monetary policy tightening was driven by rising price pressures. Inflation jumped to 7.5% in November from 6.7% in October, and the Bank expects it to hover around this level through year-end. Moreover, inflation expectations among households and businesses continued to increase amid a weak ruble, booming government spending and a labor force crisis due to military mobilization. Meanwhile, the Bank expects GDP growth in 2023 to outperform its October forecast and exceed 3.0%, adding further fuel to the inflation rally.
The CBR remained hawkish in its communique, saying that “the return of inflation to target in 2024 and its further stabilization close to 4% assume that tight monetary conditions will be maintained in the economy for a long period.” This comes against the backdrop of elevated pro-inflationary risks. An increase in domestic demand will likely continue to outpace the expansion of supply next year. Moreover, due to limited labor resources, productivity growth will likely lag further behind real wage growth. Meanwhile, geopolitical tensions and international sanctions could further weaken demand for Russian exports, driving up inflation through unfavorable exchange rate movements. Lastly, a further fiscal expansion would probably require additional monetary policy tightening to keep inflation in check.
The majority of our panelists are currently re-evaluating their forecasts. The Bank’s next meeting is scheduled for 16 February.
Commenting on the outlook, Anatoliy A Shal, analyst at JPMorgan, said: “We believe today’s hike was the last step in this tightening cycle and the current policy stance is already sufficiently (if not overly) restrictive. The next stage of policy discussions will likely focus on the appropriate duration of keeping the policy this tight.[…]However, we suspect that, as inflation momentum drops in 1H24, the pressure will build to reverse part of the recent policy tightening. We anticipate the first cut in 2Q24, with the key rate to be reduced to around 10.00% by end-2024.”
How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Russian interest rate projections for the next ten years from a panel of 18 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Russian interest rate.
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