Russia's Interest Rate Shock: A 200 Basis Point Increase

The Russian central bank raised its key interest rate by 200 basis points to 21%, marking the highest level since February 2003. This hike is in response to rising inflation, economic imbalances, and external trade issues, alongside political pressures on the central bank's current leadership.

The Russian central bank took a bold step on Friday by increasing its key interest rate by 200 basis points, raising it to 21%, a peak not seen since February 2003.

The decision comes as inflation levels reached 9.8% in September, prompting the bank to maintain a hawkish stance in the face of growing inflation expectations and to address deviations in economic growth and deteriorating trade conditions.

Analysts had anticipated a smaller rate increase, but the move underscores both domestic economic challenges and the political landscape, as central bank leadership faces pressure from powerful Russian businessmen.

(With inputs from agencies.)