Russia’s central bank maintained its key interest rate at 20% on Friday, following a sharp rise in interest rates in late February to support financial stability, and warned of higher inflation and a contraction in the economy.
The central bank met today after raising interest rates from 9.5% on February 8 to 20% when the ruble plunged to historic lows following Western sanctions on Russia in response to the invasion of Ukraine.
Today, the central bank said that inflation will return to the 4% target in 2024, but did not give estimates for inflation in 2022. “The Russian economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary “but an inevitable period of high inflation,” she said in a statement.
Russia’s economy will shrink in the coming quarters, the bank said.
High inflation affects the standard of living and has been one of the main concerns of households for years. Higher interest rates help tackle inflation by driving up the cost of lending and increasing the attractiveness of bank deposits.
Source: Capital
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