The Bank of Russia is expected to keep its restrictive stance by possibly raising the key interest rate again, guided by ongoing inflation data and rising inflation expectations. This assessment comes from Alexander Fetisov, head of the analytical department at Rosselkhozbank, who spoke with socialbites.ca.
Fetisov notes that public inflation expectations for the year ahead have shown notable moderation. They reached 12.2% in November, while annual inflation rose by 1.2% from October. He warns that the current pace of price increases could push the Bank of Russia beyond the upper boundary of its 7.5% forecast range if momentum continues unchecked.
From the Bank of Russia’s own perspective, rapid growth in corporate lending persists even after previous rate hikes. The regulator highlights a built-in margin of safety designed to support stability in both the real economy and financial system as monetary policy tightens.
Under Fetisov’s base scenario, the central bank is anticipated to lift the key rate at its December meeting by 100 basis points, bringing the rate to 16%.
He cautions that a more aggressive move cannot be ruled out to curb early-2024 inflation pressures and to ensure the 2024 inflation forecast remains within the 4-4.5% target band.
Previously, the expert had indicated a timeline for inflation to return to the target range, emphasizing the need for cautious policy calibration to manage price dynamics over the medium term.
In related developments, there have been broader monetary policy shifts in other economies, such as Türkiye, where authorities have tightened policy markedly in response to domestic price pressures. This context underscores the global sensitivity of inflation expectations to central bank actions and the ripple effects on exchange rates and credit conditions.
Analysts continue to monitor the interplay between inflation trends, expectations, and financial sector resilience as the central bank weighs another potential rate adjustment. The balance sheet strength of banks and the overall health of credit markets are seen as critical factors that could influence the speed and magnitude of any future policy moves. The ongoing dialogue between policymakers, financial institutions, and market participants is expected to shape the trajectory of monetary conditions into the new year.”