Sanctions Increase, Bet Increases: Financiers Predict Key Rate Increase From 20% To 22%

The Central Bank of Russia is expected to increase the key rate to between 20% and 22% during its next meeting in April, according to a survey of the Russian financial market participants conducted by the RIA Novosti news agency.

The Russian economy has been under severe pressure since the imposition of Western sanctions following Russia's invasion of Ukraine in February 2022. The sanctions have led to a sharp decline in the value of the ruble, a surge in inflation, and a sharp contraction in economic activity.

In an effort to stabilize the economy, the Central Bank of Russia has hiked the key rate from 9.5% to 20% since the start of the war. However, inflation continues to rise, reaching 16.7% in March 2022.

The increase in the key rate is expected to help curb inflation by making it more expensive for businesses and consumers to borrow money. This will reduce demand and slow down the pace of price increases. However, the increase in the key rate is also likely to further slow down economic growth.

The survey of financial market participants found that the median expectation is for the Central Bank of Russia to raise the key rate to 21%.

However, there is a wide range of opinions, with some analysts predicting a smaller increase of 150 basis points to 20%, and others predicting a larger increase of 300 basis points to 22%.

The final decision on the key rate will be made by the Central Bank of Russia at its meeting on April 28, 2022.

Conclusion

The increase in the key rate is a necessary step to curb inflation, but it is also likely to further slow down economic growth. The Central Bank of Russia faces a difficult task in balancing these two objectives.