(Finance) – The Russian Central Bank has raised its key rate from 16% to 18%, in response to rising inflation risks and slowing domestic demand. This is the first increase this year.
“Domestic demand growth continues to significantly outpace the possibilities of expanding the supply of goods and services. For inflation to start falling again, further tightening of monetary policy is needed, and for inflation to return to the target, significantly tighter monetary conditions than previously assumed,” the central bank of Russia said in a statement, adding that it “will assess the feasibility of a further increase in the key rate at upcoming meetings.” In May, Putin said Russia’s defense spending would reach 8.7% of GDP in 2024.
The Institute led by Elvira Nabiullina has raised inflation forecast this year, from 4.3-4.8% to 6.5-7% and also widened the corridor for price growth expectations next year from 4% to 4-4.5%.