Russian central bank raises key rate to 7.5% from 7.25%

MOSCOW, Sep 14 (PRIME) -- The board of directors of the Russian central bank has raised the key rate by 0.25 percentage points to 7.5% annually, the authority said in a statement on Friday.

“Changes in external conditions observed since the previous meeting of the board of directors have significantly increased pro-inflationary risks. The central bank forecasts annual inflation to be 5–5.5% in 2019 and return to 4% in 2020. This forecast takes into account the decisions taken with regard to the key rate and to the suspension of foreign currency purchases in the domestic market under the budget rule.”

Capital outflow due to changed external conditions triggered weakening of the ruble, and this was one of the factors accelerating inflation, as well as the increase in food price growth on low base effect and the balance of supply and demand in certain food markets. Consumer prices grew 3.1% in August, slightly more than the upper margin of the central bank’s forecast.

Inflation expectations of people and companies were elevated due to volatility of the national currency.

Gross domestic product (GDP) grew 1.9% in April–June, in line with the central bank’s expectations. The regulator has retained its GDP forecast for 2018 at 1.5–2.0%. The forecast for 2019 is 1.2–1.7%.

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