MOSCOW, August 11 The Central Bank may raise the key rate to 20 percent per annum or higher if it still has doubts about the slowdown in inflation, Deputy Chairman of the Central Bank Alexei Zabotkin said in an interview with Rossiyskaya Gazeta.
«If in the coming months we still have doubts that inflation is slowing down, and the inflation expectations of citizens and businesses are falling sufficiently and at a sufficient speed so that in 2025 inflation will again be four percent,» this is how he answered the question under what conditions the regulator will continue to raise the key rate.
The key rate is the minimum percentage at which the Central Bank issues loans to commercial banks and accepts money from them on deposits. Its size affects inflation. When the regulator raises the key rate, money in the economy becomes more expensive — bank rates on loans and deposits for the population and businesses increase. It becomes more profitable to open deposits and save than to spend and take loans. Therefore, the demand for goods and services decreases, prices begin to grow more slowly, inflation slows down.
According to Zabotkin, the Central Bank's decision may also be influenced by additional pro-inflationary risks, including a significant deterioration in external conditions, a drop in Russian exports or a reduction in the ability to receive imports.
The Central Bank began raising the key rate to combat accelerating inflation in July last year and brought it to 16 percent in December. In the first half of 2024, the rate remained unchanged, but on July 26 it was raised by two percentage points at once, to 18 percent per annum. This is the maximum rate since the beginning of April 2022, when it was at 20 percent per annum. 