Russian interest rate raised: again

RUSSIA / FSU POLITICS - In Brief 23 Oct 2021 by Alex Teddy

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As expected on October 22 the interest rate went up to 7.5%. The country contends with a triple whammy of coronavirus surging, a second lockdown and rampant inflation. The economy has returned to its pre-coronavirus size earlier in 2021. The recovery was faster than anticipated and beat most major economies. However, the country now faces a concatenation of problems.The Central Bank of Russia (CBR) said that inflation was significantly worse than foreseen. It was expected to be about 7.6% at the end of 2021. The last forecast in July for the end of 2021 was under 6%.The Governor of CBR has been proactive in dealing with inflation. She has been warning people that rising prices could wreck the economic recovery. CBR raised the key rate by 0.75%. That rise was a bit higher than the markets expected. The RUB reacted by gaining 1.4% against the USD. It is now 70.1 to the USD: its highest since February 2020.CBR said more interest rate rises are probably in store. The inflation target is 4%. Prices are rising at 7.8%. CBR's approach has been broadly welcomed even though it is not really working. However, if CBR did nothing then inflation would be much worse. Russia haunted by the spectre of 1990s raging inflation. A further 50 basis points rise in December 2021 is the least that is expected from CBR. CBR said that the semi-lockdown is probably going to aggravate inflation. CBR has not reduced its growth forecast. But other economists have said the economy is going to be hurt by the uptick inflation. Moscow has started at 10 semi-lockdown. Over 1 000 people in Russia are dying a day. Sova Capital said that the semi-lockdown in several regions will wipe 0.3% points of the cou...