Russian Federation Interest Rate

The Bank of Russia raised its key interest rate by 100bps to 13% in its September 2023 meeting, consistent with broad expectations from financial markets, and furthering the extraordinary 350bps rate hike from the middle of August, while stating it will evaluate the feasibility of further rate hikes with incoming economic data. The central bank noted that inflationary pressures in the Russian economy remain high, as growth in domestic demand outpaces low capacity due to the war-driven labor force crisis, in addition to a weakening ruble. Thus, unbalances between aggregate demand and output capacity in the Russian economy warranted higher borrowing costs to prevent unsustainable increases in inflation expectations, which in turn, may also reign in selling pressure for the ruble. Inflation was last recorded at 5.2%, at the CBR expects it to end the year between 6%-7%.