The Central Bank raised the key rate to 6.5%

The Central Bank raised the key rate by 100 basis points. This is reported on the website of the Bank of Russia.

Now the key rate is equal to the level of December 2019 - 6.5% per annum. RIA Novosti notes that this is the maximum increase for the first time since the 2014 crisis.

The Central Bank explains the rate increase by the fact that in the second quarter of this year the Russian economy reached pre-pandemic levels.

“The contribution to inflation from stable factors increased due to a faster expansion of demand compared to the possibilities for increasing output. Taking into account high inflation expectations, this has significantly shifted the balance of risks for inflation towards pro-inflationary ones and may lead to a longer upward deviation of inflation from the target,” the release says.

The Central Bank's new forecast for annual inflation for 2021 is 5.7-6.2%. “If the situation develops in accordance with the baseline forecast, the Bank of Russia will evaluate the feasibility of further increasing the key rate at the next meetings,” the message said.

As analysts surveyed by RBC noted , the increase in the key rate was expected. The main reason for this decision is growing inflation. The Bell emphasizes that its indicator has been growing in Russia for 15 months in a row; in June, inflation reached 6.5%. At the same time, the Central Bank noted that the peak has not yet been reached.