Russia hikes key interest rate to 6.75% to bring inflation under control

Russia is adhering to the controlled tightening of state monetary policy by raising the key interest rate by 25 basis points to 6.75%, the country’s central bank announced on Friday.

The latest step raises Russia’s interest rates for the fifth time this year, and is aimed at taming stubbornly high inflation.

The bank, which sets interest rates, indicated that more rate hikes were possible, but said it expects annual inflation to gradually slow down in the fourth quarter of 2021.

“Given the monetary policy stance, annual inflation will edge down to 4.0-4.5% in 2022 and will remain close to 4% further on,” the central bank added.

According to the central bank, Russia’s economy reached the pre-pandemic level in the second quarter of the current year, and is “returning to a balanced growth path.”

“If the situation develops in line with the baseline forecast, the Bank of Russia holds open the prospect of further key rate rises at its upcoming meetings,” it said in a statement.

The next rate-setting meeting is reportedly scheduled for October 22.

Higher rates, which help suppress consumer inflation by boosting lending costs and increasing the appeal of bank deposits, support Russia’s national currency, the ruble. Anticipation that the tight policy will reverse could trigger inflows of foreign funds into Russian treasury bonds.

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