The Bank of Russia’s decision to raise the key interest rate to 16% can be considered quite conservative. This opinion was expressed by Maxim Petronevich, head of the Rosselkhozbank Center for Macroeconomic and Regional Analysis and Forecasting, in a conversation with socialbites.ca.
In his view, given the current tone of the regulator’s press release, there is no reason to believe that the cycle of tightening monetary policy is over. If the inflation situation does not improve, the interest rate increase may continue at the beginning of 2024.
“Inflation pressure remained high, especially in October-November. The expert stated that core inflation was significantly above the seasonal norms of 0.9% and 1% monthly, corresponding to the target inflation level of 0.3-0.4% monthly.
Petronevich also stated that despite the Central Bank’s tightening policy, retail consumption has not yet slowed down, and this is supported by increasing wages and loans. This also requires regulator attention.
Among additional factors, the expert listed the Central Bank’s resumption of foreign exchange interventions to maintain bank liquidity. This could put limited pressure on the ruble exchange rate, but would require a response in the form of key exchange rate decisions.
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