After the Russian invasion of Ukraine, the Russian central bank raised the key interest rate by a historic 9.5 percentage points to 20 percent. Since then, the central bank has repeatedly intervened: now the key interest rate is being lowered again. It is thus well below the country's inflation rate.
Russia lowers key interest rates again and signals its willingness to take further steps downwards. The Russian central bank decided to lower the key interest rate by 1.5 percentage points to 9.5 percent. This means that the main rate for supplying commercial banks with money is back to the level it was before the Russian invasion of Ukraine. Economists had expected a smaller step down by one percentage point. "The Bank of Russia will consider the need for interest rate cuts at its upcoming meetings," the central bank said. The next rate meeting is scheduled for July 22nd.
After the Russian invasion of Ukraine, the central bank initially raised the key interest rate massively from 9.5 to 20.0 percent in order to prevent the national currency, the ruble, from collapsing. This was followed, however, by three interest rate cuts in quick succession, each by three percentage points, in view of the sanctions imposed by the West and an impending recession in the country. At the end of May, the key interest rate was finally eleven percent.
With the latest interest rate cut, however, the rate is well below the country's inflation rate, which was 17 percent at the beginning of June. The central bank has expressed the expectation that inflation will return to the target of four percent in 2024. For the current year, she lowered her inflation forecast to 14 to 17 percent. So far, the forecast has been 18 to 23 percent inflation. The central bank also announced that the decline in economic activity in the second quarter was less pronounced than expected. The decline for the year as a whole could also be lower than the April forecast. Russia's economy grew by 4.7 percent in 2021.
