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Russia’s central bank (CBR) Friday said its Board of Directors decided to keep the key rate at 20%, as expected after it was forced to lift rates almost three weeks to stabilize the financial market following the Russian invasion of Ukraine.
The Russian economy was entering the phase of a “large-scale structural transformation,” which will be accompanied by a temporary but inevitable period of increased inflation, mainly related to adjustments of relative prices across a wide range of goods and services, pointed out the central bank in its policy statement.
“The drastic change in external conditions for the Russian economy that occurred at the end of February has created threats to financial stability,” wrote CBR in its statement.” The Bank of Russia’s decision to increase in the key rate on 28 February and capital controls helped support the stable functioning of the Russian financial system.”
According to CBR estimates, Russia’s gross domestic product (GDP) will reduce over the coming quarters. This decline will be mainly driven by supply-side factors, as such producing a limited disinflationary effect, noted the central bank.
CBR added it expected annual inflation to return to 4% in 2024.
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