The Bank of Russia is expected to raise its key interest rate by one percentage point at the upcoming meeting, potentially lifting the rate to 14 percent per year. This forecast is reported by Bloomberg Economics economist Alexander Isakov, as cited by the portal. Isakov believes that Elvira Nabiullina, the central bank head, will not want to disappoint market expectations and may implement at least two one percentage point hikes. The analyst notes that through March 2024 the central bank had signalled a soft stance, a posture that could invite renewed ruble depreciation in an environment of elevated inflation. The bank had previously projected inflation in 2023 to be around 6 to 7 percent, and the planned rate increase would mark a third successive tightening step amid ongoing inflation pressures and a weakening currency. Bloomberg Economics draws attention to the risks accompanying such a trajectory for the ruble as the economy faces price pressures and the currency loses ground. The discussion underscores the central bank’s role in balancing price stability with the need to support growth, a task complicated by external and internal forces acting on the ruble.
In a more assertive tone, economist Andrei Barkhota floated a bolder forecast suggesting the central bank could push the rate to 15 percent at the meeting scheduled for October 27. Analysts consulted in the central bank survey lifted their GDP growth forecast to about 2.5 percent and their inflation anticipation for 2023 to roughly 7 percent. They also increased their base rate projection for the year to around 9.8 percent, reflecting a consensus that policy would remain tight as inflation persists and the currency remains under pressure. The evolving expectations point to a policy path that emphasizes restraint in borrowing costs to anchor inflation expectations and defend against currency weakness.
Earlier in the week, the Court of Accounts highlighted risks facing the state budget for the years 2024 through 2026. The central bank subsequently reaffirmed that even with tight monetary policy, loan demand remains robust, signaling sustained activity in credit markets and the need to monitor financial stability alongside inflation. The discourse surrounding budgetary risks and credit demand illustrates how monetary policy interacts with fiscal planning and public finance as the economy adapts to a high-rate environment.
Former Minister of Economic Development Maxim Reshetnikov weighed in on the consequences of high interest rates imposed by the central bank, reflecting on the broader implications for investment, consumption, and long-run growth. His assessment contributes to the ongoing debate about how monetary tightening shapes macroeconomic outcomes and the prospects for easing policy in the future once inflation pressures ease. The dialogue among economists, policymakers, and financial authorities highlights a central theme: policy decisions carry tradeoffs between price stability, financial conditions, and real economic activity.