Central bank of Russia raised its benchmark rate one percentage point to 13 % amid inflation Worries
A month after imposing an even greater hike, the Central Bank of Russia increased its benchmark lending rate by one percentage point to 13 percent on Friday.
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This move was made as inflation worries persisted and the ruble's exchange rate against the dollar continued to deteriorate.
The hike coincides with September's increase in annualised inflation to 5.5 percent, which the bank said would rise to 6-7 percent by year's end.
The hike coincides with annualised inflation rising to 5.5 percent in September, and the bank forecasting it to reach 6-7 percent by the end of the year.
There is still a lot of inflationary pressure in the Russian economy. The bank's board stated in a statement that significant pro-inflationary risks have materialised, including the domestic demand expansion surpassing the capacity for output development and the ruble's depreciation throughout the summer.
As a result, it is necessary to further tighten financial circumstances.
As the ruble fell to 100 to the dollar in August, the bank raised the lending rate by 3.5 percentage points to 12 percent. Despite a slight improvement in the ruble's exchange rate following the rate increase, it still trades at roughly 95 to the dollar, which is much lower than it did a year ago when it was trading at about 60 to the US dollar.
Russia is importing more and exporting less, particularly of oil and natural gas, while spending more on military and the effects of sanctions are contributing to price increases, which the central bank is attempting to thwart. Reduced trade surplus results from more imports and decreased exports, which often puts pressure on a nation's currency.
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