The Bank of Russia 

(KPL​ /TASS) The Bank of Russia raised the key rate by 100 basis points to 13% per annum and said it would assess the feasibility of its further increase at upcoming meetings, the regulator said on Friday.

"On 15 September 2023, the Bank of Russia Board of Directors decided to increase the key rate by 100 basis points to 13.00% per annum. Inflationary pressure in the Russian economy remains high. Significant proinflationary risks have crystallized, namely the domestic demand growth outpacing the output expansion capacity and the depreciation of the ruble in the summer months. Therefore, it is required to additionally tighten monetary conditions to limit the upward deviation of inflation from the target and return it to 4% in 2024. The return of inflation to the target and its further stabilization close to 4% also implies that tight monetary conditions will be maintained in the economy for a long period," the statement said.
The Bank of Russia also will make its further decisions on the key rate, "taking into account actual and expected inflation movements relative to the target and the progress of the structural transformation of the economy, as well as assessing risks from internal and external conditions and financial markets’ response to these risks."

At the same time, the regulator raised its projection for the average value of the key rate - by the end of 2023, it is predicted to reach 9.6-9.7% rather than 7.9-8.3%, 11.5-12.5% in 2024 (prior projection - 8.5-9.5%), and 7-8% in 2025 (before - 6.5-8.5%). The projection for 2026 is unchanged at 5.5-6.5%.

Annual inflation in Russia as of September 11 increased to 5.5% after 4.3% in July and 5.2% in August. According to the regulator, current inflationary pressures increased, partly as a result of the ruble's depreciation being reflected in pricing. Seasonally adjusted price growth reached 9% year-on-year on average over the last three months, while the core inflation rate remained unchanged at 8.4%.

Following the meeting, the Bank of Russia also presented its medium-term forecast. The Bank of Russia lowered the upper limit of Russia’s economic growth for 2024, setting a 0.5-1.5% range, the regulator said. "The Bank of Russia’s monetary policy pursued will create the conditions for returning the economy to the balanced growth path. In its baseline scenario, the Bank of Russia forecasts that the GDP growth rate will be 1.5-2.5% in 2023, 0.5-1.5% in 2024, 1.0-2.0% in 2025, and 1.5-2.5% in 2026," the statement said.
At the same time, the Bank of Russia raised its inflation forecast for 2023 to 6-7% from 5-6.5% expected earlier and maintained its 4% forecast for 2024 and beyond. "According to the updated forecast of the Bank of Russia, annual inflation will stay at 6.0-7.0% in 2023. Given the monetary policy pursued, annual inflation will return to 4% in 2024 and stay close to 4% further on," the statement said.
The Urals oil price projection for 2023 and 2024 has been increased to $60 per barrel from $55. The projection for 2025 and 2026 remained unchanged at $55 per barrel.
The Bank of Russia Board of Directors will hold its next rate review meeting on October 27.