The Central Bank raised the key rate to a record 21%

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The Central Bank today raised its key rate by 200 bp. - from 19% to 21% per annum. This is more than immediately after the start of the war. The regulator stated that further tightening of monetary policy is required to return inflation to the target and reduce inflation expectations.

Inflation is significantly higher than forecast (9.8% in September annualized, seasonally adjusted), and inflation pressure has approached its maximum values ​​since the beginning of 2024, the Central Bank writes. Besides:

• The Russian economy continues to grow, but at a more moderate pace than in the first half of 2024. The slowdown is associated with growing restrictions on the supply side: the availability of labor resources is declining, as is free production capacity.
• The labor market remains tight, unemployment is at historic lows, and labor shortages are growing across a wide range of industries. Wage growth continues to outpace labor productivity growth.
• The population saves more in an environment of high rates, but the growth rate of corporate lending is still high. Therefore, total credit to the economy is still growing at a high rate.
• In the medium term, the balance of risks for inflation is shifted towards pro-inflationary ones. The Central Bank cites the deterioration of foreign trade terms as one of the reasons.

In addition, the Central Bank presented a new medium-term forecast based on the results of today's meeting of the board of directors. It worsened the inflation forecast for 2025. In July, the Central Bank expected that next year it would be possible to achieve inflation (December to December) of 4-4.5%; in the new forecast, price growth is expected at 4.5-5%. Because of this, the range of the predicted average key rate has also changed, now it is 17-20% (from 14-16%).

They're talking about it

Analysts considered it most likely that the Central Bank would raise the rate to 20%, but the option of 21% was also quite expected. The main thing in the Central Bank’s forecast is the forecast of the average rate until the end of the year (21.0-21.3%), writes the MMI channel - this means that at the meeting on December 20, the rate could be raised immediately to 23%.

We explained why high rates last a long time here .