The Bank of Russia decided to retain the key rate at 7.5% per annum at its first meeting this year, the regulator said in its report on Friday, Trend reports with reference to TASS.
"On 10 February 2023, the Bank of Russia Board of Directors decided to keep the key rate at 7.50% per annum. Current price growth rates are increasing, remaining moderate in terms of sustainable components. Inflation expectations of households and businesses edged down but remain elevated. Economic activity trends evolve better than the Bank of Russia’s October forecast," the statement said.
In its future decisions on the key rate, the Bank of Russia plans to take into account "actual and expected inflation dynamics relative to the target and economic transformation processes, as well as risks posed by domestic and external conditions and the reaction of financial markets". "If pro-inflation risks intensify, the Bank of Russia will consider the necessity of key rate increase at its upcoming meetings," the regulator said.
According to the new forecast, the average key rate in 2023 is expected at the level of 7-9%, while in October 2022 the regulator forecast set this figure at the level of 6.5-8.5%. The forecast for 2024 expects the key rate at the level of 6.5-7.5% per annum against the previously forecasted range of 6-7%.
At the same time, the Bank of Russia improved its forecast for GDP dynamics in 2023, expecting the range from -1% to +1%. "Taking into account the ongoing structural transformation of the Russian economy, the Bank of Russia’s baseline scenario forecasts the growth of GDP at (-1.0) - (+1.0)% in 2023 and 0.5-2.5% in 2024. In 2025, GDP will grow by 1.5-2.5%," the regulator said.
"As estimated by the Bank of Russia, 2022 GDP decreased by 2.5%. In late 2022 and early 2023, flash data suggest that business and consumer activity trends, as well as those of foreign trade, are evolving better than forecast by the Bank of Russia in October," the Bank of Russia said.
Annual inflation in Russia in the coming months will temporarily be below 4% due to the high base effect in 2022. "The Bank of Russia forecasts that in the coming months, annual inflation will temporarily fall below 4% under the influence of last year’s high base effect. At the same time, the sustainable inflationary pressure will gradually increase from moderately low levels," the regulator said.
According to the statement, as of February 6, annual inflation was 11.8% after 11.9% in December 2022, and the current price growth rate accelerating since the beginning of 2023.
The next meeting of the Bank of Russia's Board of Directors, which will discuss the key rate, is scheduled for March 17, 2023.