Russian Federation Interest Rate

The Bank of Russia held its benchmark interest rate at 16% for the third consecutive decision in its April 2024 meeting, maintaining the peak rate of the current cycle, but warned that restrictive monetary policy will be necessary for longer than previously thought to combat inflation. The recovery in domestic demand continued to outstrip the limited capacity of the Russian economy, maintaining upside risks to inflation and warranting an even longer period of peak interest rates. This was also magnified by the ongoing labor supply crisis as a result of the male working-age diaspora to escape military mobilization. Inflation expectations were upwardly revised to 4.3%-4.8% this year before easing to 4% in 2025, while the CBR does not expect the interest rate to drop below 15% this year. Meanwhile, the central bank stated that the Russian economy expanded at a stronger-than-expected level in Q1, driving policymakers to upwardly revise this year’s GDP estimate to a 2.5-3.5% growth rate.