Russian central bank holds key rate at 7.5%, noting high inflation expectations

RUSSIA’S central bank held its key interest rate at 7.5 per cent on Friday (Oct 28), ending a months-long rate-cutting cycle as it noted a pickup in inflation expectations and warned of long-term pro-inflationary effects from Russia’s partial mobilisation.

In the immediate aftermath of Moscow sending its armed forces into Ukraine on Feb 24, the central bank hiked its key rate to 20 per cent from 9.5 per cent in order to mitigate risks to financial stability.

Since then it has cut rates six times and omitted forward-looking guidance at its previous meeting in September about studying the need for future reductions. The rate hold was in line with a consensus forecast of analysts polled by Reuters earlier this week.

“The Bank of Russia assesses that the partial mobilisation will serve as a deterrent to consumer demand and inflation over the horizon of coming months,” the bank said in a statement.

“However, its subsequent effects will be pro-inflationary as it adds to supply-side restrictions.”

President Vladimir Putin ordered a “partial mobilisation” of hundreds of thousands of men last month for the military campaign in Ukraine. REUTERS