Russian Central Bank Raises Interest Rates Again to Combat Inflation

Policymakers Struggle to Balance Economic Growth and Price Stability

Central Bank Hikes Interest Rates for Third Time in 2022

The Central Bank of the Russian Federation (CBR) has announced a further interest rate increase, raising the key rate from 8.5% to 9.5%. This marks the third interest rate hike by the CBR so far in 2022, as policymakers grapple with rising inflation and geopolitical uncertainty.

The decision to raise interest rates was made at the CBR's regular meeting on Friday, amidst growing concerns about the impact of the war in Ukraine on the Russian economy. Inflation in Russia has accelerated rapidly in recent months, hitting a 20-year high of 9.15% in March 2022.

The CBR has been raising interest rates in an attempt to curb inflation and stabilize the Russian ruble, which has been under pressure since the start of the war in Ukraine. However, the central bank is also aware that raising interest rates too aggressively could dampen economic growth.

The Russian economy is expected to contract by 8.5% in 2022, according to the International Monetary Fund (IMF). The IMF also predicts that inflation in Russia will average 20.3% in 2022, significantly higher than the CBR's target of 4%.

The CBR is facing a difficult balancing act, as it tries to combat inflation without derailing economic growth. The central bank's decision to raise interest rates again is a sign that it is becoming increasingly concerned about the inflationary pressures facing the Russian economy.

The CBR's next scheduled meeting is on June 10, 2022. It will be closely watched by markets and policymakers alike, as they look for clues about the central bank's future monetary policy stance.