CBR Decided to Keep Its Key Rate Intact at 16 Percent, despite Rumors of its Hike to 17 Percent

Today, on June 7, the Bank of Russia (CBR), despite the prevailing rumors favoring the resumption of the rate hikes, decided to keep the key rate at 16%. The last meeting on the key rate was held on April 16, 2024. Then it was decided to keep it at the same level, 16% per annum. At the same time, the Bank of Russia admits the possibility of raising the key rate at the next meeting, despite the State parliament (Duma) noted that the Central Bank may start reducing the key rate in September 2024. This can happen only if inflation in the country will be under control.

The Bank of Russia, explaining its pivotal for the local markets' decision, noted that one of the biggest reasons for hesitation was the suddenly halted moderation of domestic consumer prices. At the same time, the demand growth left behind the expansion of supply of goods and services. The main constraint for the output expansion reportedly derives from the shortage of workforce. At the same time, the labor market firmness “continues to grow”.

Also, according to the Central Bank of Russia, in April, consumer inflation rose by 5.8%. Annual inflation, as of June 3, expanded to 8.1% after reaching 7.8% in April. In the medium-term, the risks to inflation have been tilting toward the pro-inflationary. The persistence of large-scale government benefit programs could slow the pace of moderation of credit market growth. Disinflationary risks are primarily associated with a faster slowdown in domestic demand growth than expected in the baseline scenario.