Central bank says keeps key rate at 7.5% for 3rd time

MOSCOW, Feb 10 (PRIME) -- The central bank has kept the key rate at 7.5% annually for a third time in a row, it said in a statement on Friday.

"The price increase is accelerating, while growth of its stable components remains moderate. Inflationary expectations of the population and business have decreased but remain elevated. The dynamics of economic activity outperformed the October's forecast of the Central Bank of Russia," the central bank said.

Annual inflation stood at 11.8% as of Monday after 11.9% in December 2022.

Inflationary pressure accelerates partially thanks to volatile components, like prices for fruit and vegetables and weakening of the ruble at the end of 2022.

Annual inflation is to decrease temporarily below 4% over the next few months thanks to a high base effect of the same period of 2022, while stable inflationary pressure will likely be on the rise. The central bank forecasts a 5–7% inflation in 2023, taking into account the monetary policy and a 4% price rise in 2024.

The price expectations of companies demonstrated a decrease in January for the first time after several months of growth. Expectations of professional analysts grew slightly for 2023 but are anchored near 4% in the medium term.

The credit terms remained neutral in general since the last meeting of the central bank's board. The OFZ federal bond yields grew, while loan and deposit rates remained virtually unchanged. The amount of deposits increased, lending activity was robust in general, most of all, in the corporate and mortgage segments.

Consumption remained cautious on the back of elevated inflation expectations, the tendency to save was still present.

The central bank estimates the gross domestic product (GDP) decrease in 2022 at 2.5%. The latest data signal that business, consumption and foreign trade dynamics is better than the central bank forecasted in October. The GDP can either fall by up to 1% or rise by 1% in 2023, grow by 0.5–2.5% in 2024 and by 1.5–2.5% in 2025.

The balance of risks is pro-inflationary in the short and medium term due to a lack of workforce, reduction of exports, the possibility of budget deficit widening, and high and unanchored inflationary expectations.

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