Russia hikes rates to higher-than-expected 15%
By Alexander Marrow and Elena Fabrichnaya
MOSCOW (Reuters) -The Bank of Russia hiked interest rates by a higher than expected 200 basis points to 15% on Friday, raising borrowing costs for the fourth meeting running in response to a weak rouble, stubborn inflation and budget spending.
The central bank has raised rates by 750 basis points since July, including an unscheduled emergency hike in August as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy.
«Current inflationary pressures have significantly increased to a level above the Bank of Russia’s expectations,» it said in a statement, pointing to domestic demand outpacing the provision of goods and services, and high lending growth.
Governor Elvira Nabiullina also said the budget was a significant factor in Friday's decision, as Russia increases government spending, pouring cash into the defence sector to ramp up military production and prosecute what it calls its «special military operation» in Ukraine.
«The updated medium-term parameters of fiscal policy assume a slower than expected decline in fiscal stimulus in the years ahead,» the bank said.
It also acknowledged for the first time that it may not succeed in returning inflation to its 4% target next year, forecasting year-end inflation for 2024 at 4-4.5%.
The majority of analysts polled by Reuters had expected a hike to 14%. The rouble leapt to a more than six-week high against the dollar after the decision.
FRONT-LOADED TIGHTENING
The central bank's tightening cycle began this summer when inflationary pressure from a tight labour market, strong consumer demand and a budget deficit was compounded by the falling rouble.
Russia had gradually reversed an emergency hike
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