Bank of Russia Gearing Up for Possible Further Rate Hike – Currency Thoughts
Bank of Russia Gearing Up for Possible Further Rate Hike
June 7, 2024
The Bank of Russia, where officials left the interest rate benchmark today unchanged at 16.0% and delivered the following warning after today’s policy review:
Growth in domestic demand is still outstripping the capabilities to expand the supply of goods and services. The Bank of Russia holds open the prospect of increasing the key rate at its upcoming meeting. Furthermore, returning inflation to the target will require a significantly longer period of maintaining tight monetary conditions in the economy than it was forecast in April.
President Putin’s war is straining the supply of workers for non-military purposes and has elicited Western sanctions that disrupt input supply chains. The Bank of Russia’s interest rate was catapulted from 7.5% at the end to May 2023 to the current 16.0% by the end of the year. But between April 2023 and April 2024, total and core consumer inflation accelerated from 2.3% and 2.4% to 7.8% and 8.3%. The bank’s latest statement goes on to state that measures of expected inflation have risen and that, all in all, price risks have become increasingly skewed to the upside.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Russia
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