The Central Bank raised the key rate by two percentage points on Friday, July 26. It was set at 18% per annum.
This is the maximum since the beginning of April 2022. Then the rate was at the level of 20% per annum.
The Russian Central Bank justified the tightening of monetary policy. The regulator explained the increase in the rate by the fact that it is necessary for inflation to begin to decline again. The Bank of Russia said that it needs tighter monetary conditions for it to return to the target.
The central bank started raising the rate from July 2023 and in December it amounted to 16%. It did not change at the end of meetings in February, March, April and June this year.
Earlier, experts and analysts predicted an increase in the key rate to 18% per annum in July.
The key rate is the minimum interest rate at which commercial banks are granted loans by the Central Bank and at which they accept money for deposits.
The size of the rate affects inflation. When it rises, money becomes more expensive - the rates on bank loans for households and businesses rise.
In such a case, it becomes more profitable to open a savings deposit than to take a loan. For this reason, the demand for goods and services falls, prices rise more slowly and so does inflation.