Russia (bbabo.net), - At the first meeting of the board of directors on monetary policy this year, the Bank of Russia once again raised the key rate. It was increased immediately by one percentage point: from 8.5% to 9.5% per annum. The Central Bank admits that the key rate increase will continue at the next meetings.
Inflation continues to be high for a variety of reasons. "The expansion of demand continues to outstrip the possibilities of increasing output. The rapid growth of economic activity with limited free labor resources increases inflationary pressure. The situation on world commodity markets remains pro-inflationary. Inflation expectations are not decreasing yet, remaining at multi-year highs. Under these conditions, the balance of risks for inflation has shifted even more towards pro-inflationary ones," the Bank of Russia states.
The Central Bank admits the possibility of a further increase in the key rate at the next meetings. Decisions on the key rate will be made taking into account the actual and expected dynamics of inflation relative to the target, the development of the economy over the forecast horizon, as well as the assessment of risks from internal and external conditions and the reaction of financial markets to them, the Bank of Russia explains. According to the Central Bank’s forecast, taking into account the ongoing monetary policy, annual inflation will decrease to 5-6% in 2022 and return to the target in mid-2023. In the future, annual inflation will be close to the target 4%, according to the Bank of Russia.
This is the eighth consecutive increase in the key rate against the backdrop of high inflation, which has not yet been reduced. Thus, according to the latest data from Rosstat, in early February, annual inflation accelerated to 8.8%. At the end of 2021, the inflation rate was 8.4%, which is the highest since 2015.
In January 2022, at the Gaidar Forum, the head of the Bank of Russia, Elvira Nabiullina, said that inflation could have been four percentage points higher in 2021 if the Central Bank had not raised the key rate. "We would have had to raise the rate even more, and inflationary expectations would have warmed up, that is, this would mean, in fact, untimely action, the need for a tougher policy," she said. Nabiullina stressed that the monetary policy of the Bank of Russia cannot suppress inflation immediately, but this does not mean that it does not work: the increase in the key rate affects inflation with a time lag.
Inflation began to noticeably accelerate a year ago, at the same time (at the March 2021 meeting) the Bank of Russia began a cycle of raising the key rate. The rate began to rise from 4.25%, which was a historical low for the indicator (in the first half of 2020, the Central Bank, on the contrary, lowered the rate to help the economy during the coronavirus crisis through cheap credit).
The next meeting of the Board of Directors of the Bank of Russia, where the level of the key rate will be considered, is scheduled for March 18.
How much more profitable will deposits be for Russians after raising the Central Bank rate Text: Georgy Panin After another increase by the Central Bank of the key rate to 9.5 percent per annum, bank deposits will become even more attractive for Russians.
Now the average maximum rate on deposits in credit institutions from the top 10 has risen to 7.8 percent, according to the Central Bank of the Russian Federation. But this is still below the level of inflation and people are in no hurry to replenish deposits.
“A new rise in the key rate will also pull up the return on deposits. Growth can be at least 1 percent,” said Ksenia Artemyeva, COO of the Fast River fintech platform. “However, banks with an aggressive marketing strategy can increase the return on deposits even more - up to 9, 5-10 percent to attract customers, while the average maximum rate can be fixed at 9 percent, but this is not the limit."
Also, according to the expert, if the inflationary acceleration continues, in the future the return on deposits may grow up to 11-12 percent. But the records of 2014, Ksenia Artemyeva believes, when investors were promised up to 14-15 percent per annum, we will no longer see.
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