Russia's Central Bank Hikes Interest Rate to 19% Amid Inflation Concerns

Russia's central bank increased its benchmark interest rate to 19%, citing the need to curb inflation. Despite predictions of holding steady, recent data indicated persistent inflation, necessitating further tightening. The bank's long-term strategy includes maintaining strict monetary policies. Economic growth projections have also been adjusted for the coming year.

In a decisive move to combat persistent inflation, Russia's central bank raised its benchmark interest rate by 100 basis points to 19% during a board meeting on Friday. The bank emphasized the necessity of further tightening financial policies to curb inflation.

A Reuters poll of 27 analysts had anticipated that the rate would remain at 18%, amid early indicators of economic cooling. However, recent figures released on Thursday indicated that inflation remains high, compelling the bank to act. The central bank noted that inflation fell only slightly in August, to 9.05%, from the previous month's 9.13%.

Seasonally adjusted core inflation increased to 7.7% in August from 6.1% in July, highlighting sustained price pressures. The bank's latest projections indicate an inflation rate of 7.3% for the entire year, exceeding its 4% target. The central bank also stated that despite expectations for a gradual decline in inflation by year-end, tight monetary policies would be necessary long-term. The government is now forecasting GDP growth to slow to 3.9% in 2024, down from 4.6% in the first half of this year.

(With inputs from agencies.)