The decision to increase the ratio from 4.5% to 5% was made amid a weak ruble, high inflation and geopolitical tensions erupted.
The central bank of Russia raised its prime rate to 5% on Friday, a larger-than-expected jump amid a weak ruble, high inflation and geopolitical risks, signaling that there will be more. interest rate hike again.
The decision to raise interest rates from 4.5% contrasts with predictions from a majority of analysts polled by Reuters news agency, who predict a moderate increase of 25 basis points after a wave New sanctions hit the ruble and inflation shows little signs of slowing down.
“The rapid recovery of demand and rising inflationary pressures call for an earlier return to neutral monetary policy,” the bank said in a statement.
The central bank raised interest rates for the second time this year as inflation, its main responsible sector, rose to 5.8 percent in March, the highest level since 2016.
The central bank says inflation will be in the range of 4.7 to 5.2 percent by the end of 2021, returning to the 4 percent target just by mid-2022, later than previously expected.
“The Central Bank of Russia will consider the need for further key rate hikes at upcoming meetings,” it said.
The bank will consider increasing lending costs further after cutting the base rate to a record low of 4.25% in 2020, when the economy is hit by oil prices, its main export commodity. Russia. The coronavirus pandemic has also affected the economy, which is on track to recover this year.
Lower interest rates support the economy through cheaper lending, but can also boost inflation and make the ruble more vulnerable to external shocks.
The Russian currency has fallen this month, separate from moves on other emerging markets as well as crude oil prices, as it was affected by concerns about US sanctions and Russian construction. army near Ukraine.
Relations with the US and Europe deteriorated significantly this month with diplomatic sanctions and expulsion, but tensions over Ukraine have decreased significantly over the past two days with the withdrawal of Russian forces from near the border. gender.
The ruble extended its recent gain after the exchange rate rose, hitting 74.76 against the US dollar compared with around 75 seen before the announcement.
Elvira Nabiullina, the central bank’s governor, will shed more light on the central bank’s monetary policy forecasts and plans at an online press conference at 12:00 GMT.
The next rate-setting meeting is scheduled for June 11.