According to the following news, the board of directors of the Bank of Russia decided to increase the key interest rate by 50 basis points to 5% per year. website CB RF.
“The growth rate of consumer prices and the expectations of the population and businesses on inflation remain high. The recovery of demand is becoming more stable, and the output of many sectors exceeds the possibility of increasing output. In this case, the balance of risks is Huge. The Bank of Russia’s forecast of inflation in 2021 has been raised to 4,7-5.2%”,-said in a press release from the regulator.
The Central Bank said: “The rapid recovery of demand and the formation of inflationary pressures require an earlier restoration of a neutral monetary policy. The Bank of Russia will evaluate the feasibility of further raising the key interest rate at the next meeting.”
All analysts surveyed “Interfax”, The central bank’s main interest rate is expected to rise, while some predict it will rise by 25, while others expect it will rise by 50 basis points. At the last meeting on March 19, the Bank of Russia board raised the key interest rate by 25 basis points. -Up to 4.5% per year. The next meeting of the Central Bank of the Russian Federation will be held on June 11, which will consider the issue of key interest rate levels.
The Central Bank of the Russian Federation clarified that the country’s inflation rate continues to be higher than the Bank of Russia’s forecast. In March, the annual growth rate of consumer prices rose to 5.8% (from 5.7% in February). As of April 19, the annual inflation rate has dropped to 5.5%. This largely reflects the steady rise in domestic demand: funds not spent on foreign travel are partly redistributed for domestic consumption of goods and services.
At the same time, the recovery of economic activity has become more and more sustainable. At the end of the first quarter, retail sales were close to the level before the pandemic began, and the population-oriented service sector was actively recovering. The phasing out of restrictive measures and gradual vaccination will help achieve this goal. According to monitoring data from the Bank of Russia, more than half of the companies surveyed reported that demand for their products has recovered or exceeded the level before the pandemic began. Despite the continuing difficulties of the world epidemic, investment demand has continued to grow, unemployment has fallen, and external demand has continued to grow.
The Bank of Russia predicts that the Russian economy will grow by 3.0-4.0% in 2021. This means that the Russian economy will return to its pre-crisis level in the second half of 2021. According to the forecast of the Bank of Russia, between 2022 and 2023, GDP will grow by 2.5-3.5% and 2.0-3.0%, respectively.
The medium-term trajectory of economic growth will be significantly affected by internal and external conditions. The dynamics of domestic demand will largely depend on the pace of further expansion of private demand. The decline in households’ propensity to save and the increase in income and loans will provide support for consumer demand. Changes in external demand will largely depend on the budgetary support measures of various developed countries and the vaccination rate in the world. Especially due to the low vaccination rate, the spread of new virus strains and the tightening of related restrictive measures, the economic recovery may slow down.