In Russia, a key rate boost cycle is allowed from 21 July at 14:43.

The Central Bank of Russia will raise the key rate by 0.5 percentage points to 8% year on year on July 21, and larger incremental steps are not excluded. From this moment begins the cycle of increasing the main instrument of monetary policy – for example, on September 15 it may grow by another 0.5 percentage points. compared to July. Such an estimate was given to socialbites.ca by Sovcombank chief analyst Mikhail Vasiliev.

“The Central Bank will begin its rate hike cycle this Friday to cool down credit, consumer and investment demand to slow inflation and bring it back to its 4% target in 2024. We do not exclude a larger rate hike of 0.75 percentage points in July. and 1 point,” he said.

According to Rosstat, annual inflation in June rose to 3.25% from 2.51% in May. According to Vasiliev, the current seasonally adjusted annual rate of price growth exceeds the target for the second month in a row.

“The main risk of consumer price disintegration in the coming months is the weakening of the ruble. The dollar has reached 90 rubles per dollar, up 9% since the last meeting. At the same time, the dollar has grown 30% since the beginning of the year and 50% since November. The weakening of the ruble has already been reflected in the 0.42% monthly acceleration in non-food prices in June, after 0.34% in May and 0.15% in April.

Vasiliev assumed that annual inflation would exceed 4% in July, rise above 5% in September and close the year around 6.5%. “The economy is growing faster than expected, the labor market remains tight, and the worker shortage is widening,” he said. The analyst said unemployment hit a historic low of 3.2% in May, after 3.3% in April.

The specialist emphasized that due to the shortage of personnel, salaries increased rapidly and left behind labor productivity. According to Rosstat, salaries in Russia increased by 10.4% in real terms in April after increasing 2.7% in March. The expert added that the fact that citizens earn more and spend more causes inflation to accelerate.

“This will be a rate increase cycle, not a one-time rate increase. “Our estimates are that by the September meeting, annual inflation will already exceed 5 percent and will require further regulatory action, so the rate may rise another 0.5 percentage point,” he said.

By the end of 2023, according to Vasilyev’s forecasts, the key rate will be 8.5% per annum, there are still risks of reaching 9-10%. The current level of the instrument – 7.5% – was set by the Central Bank on September 19 and has not changed since then.

Previously reported About the consequences of a weak ruble for the Russian economy.