Cbank raises key rate to 7.5% as inflation tops forecast strongly

MOSCOW, Oct 22 (PRIME) -- The Russian central bank has raised the key rate by 75 basis points to 7.5% annually saying that inflation is strongly higher than the forecast, the authority said in a statement Friday.

"Inflation is much higher than the forecast of the Central Bank of Russia and is expected at 7.4–7.9% at the end of 2021. Contribution of stable factors to inflation remains significant due to a faster expansion of demand as compared with the output growth capacity," the central bank said, adding that there is a strong pro-inflation skew of risks.

The authority does not rule out a further increase of the key rate at the next meetings if the situation develops in accordance with the base forecast of the central bank. The average key rate in the rest of 2021 is expected at 7.5–7.7%, in 2022 at 7.3–8.3%.

In September, annual inflation rose to 7.4% from 6.7% in August, and consumer price rise reached 7.8% as of Monday. Inflation expectations of citizens in October reached a five-year peak, the corporate ones were also near maximums for several years.

The previous key rate growth affected the lending rate only slightly. Corporate loans continued to grow at the highest rates for the last few years, the mortgage and unsecured consumer lending activity remained at a high level.

The central bank plans that its policies would cut inflation to 4.0–4.5% in 2022 and keep it near 4% after that.

The latest indicators for July–September demonstrated continuing economic growth, but at a somewhat lower rate. The central bank sees this connected in many respects with the return of the Russian economy to balanced growth. The central bank forecasts the gross domestic product (GDP) to rise 4.0–4.5% in 2021 and by 2–3% in 2022–2024.

The next meeting of the central bank's board is scheduled for December 17.

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