The Central Bank of Russia raised its key rate to a record | News from Germany about Russia | DW

The Central Bank of the Russian Federation increases the key rate under the loan agreement from 5.5 percent to 6.5 percent. The financial regulator announced this on Friday, July 23, in Moscow.

Having raised the key rate from 5.5 to 6.5 percent per annum, the Central Bank took the maximum step of raising the key rate since the end of 2014. According to the Bank of Russia estimates, in the second quarter of 2021, the Russian economy reached a pre-pandemic level. The contribution to inflation from the side of stable factors increased due to the faster expansion of demand compared to the possibilities of increasing output.

Amid high inflation

According to forecasts of the bank’s experts, in 2021 the inflation rate will be from 5.7 to 6.2 percent, and in 2022 – from 4.0 to 4.5 percent. “We must not put up with high inflationary expectations, so that they do not anchor at this high level and then we do not have to further raise the key rate”, – this is how the head of the Central Bank Elvira Nabiullina substantiated the move of the Central Bank.

As stressed in the Central Bank, the decision on the key rate is aimed at returning inflation to 4 percent. However, now inflation is growing above the Central Bank’s forecast. Annual inflation increased to 6.5 percent after 6.0 percent in May and, as of July 19, remained at the same level. At the same time, consumer prices fell slightly, but still remain high.

Due to high inflation, the standard of living of many Russians is falling. However, according to forecasts of the Central Bank, the situation will change, and a good harvest may have a downward impact on inflation. At the same time, the Central Bank notes the current decline in prices for products included in the so-called “borscht set”, and expresses confidence that this trend will continue.

See also:

• Infographic: How Russia Accumulated and Expenditure Its Reserve Fund

  This is how the volume of the fund changed in rubles …

  The initiative to create a fund in which oil and gas surplus profits would be accumulated for a “rainy day” belongs to the former Minister of Finance of the Russian Federation Alexei Kudrin. Since 2004, the Stabilization Fund has been operating in Russia, the funds of which by February 1, 2008 were distributed between the Reserve Fund and the National Welfare Fund.

• 

  Infographic: How Russia Accumulated and Expenditure Its Reserve Fund

  … but the dynamics in US dollars

  The active use of the fund’s resources in 2009-2010 made it possible to successfully mitigate the consequences of the global economic crisis. Then the reserves in dollars partially recovered, and in rubles – thanks to the devaluation of 2014 – even exceeded the initial level. In the last year and a half, the reserves are again rapidly being spent: their volume has decreased during this time by 55 percent.

  Author: Andrey Gurkov

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