Russia’s central bank raises key rate to 21% to rein in higher-than-forecast inflation

Russia’s central bank on Friday raised its key interest rate by 200 basis points to 21%, citing consumer price increases considerably above its forecast and warning of ongoing high inflation risks in the medium term.

The move exceeds the 100 basis-point hike expected by analysts and brings the institution’s benchmark rate to its highest since February 2003, according to Reuters. The key rate was previously taken up by 100 basis points to 19% in September.

On Friday, the central bank noted annual seasonally adjusted inflation hit an average of 9.8% in September, up from 7.5% in August. It now anticipates the print will sit in a 8.0–8.5% range by the end of 2024 — and is running “considerable above” a July forecast of near 6.5-7.0%.

“Over the medium-term horizon, the balance of inflation risks is still significantly tilted to the upside,” the bank said in a statement. “The key risks are associated with persistently high inflation expectations and the upward deviation of the Russian economy from a balanced growth path, as well as with a deterioration in foreign trade conditions.”

Russia’s economy has been constrained by depressed global prices for its key oil exports and by Western sanctions following Moscow’s invasion of Ukraine, leading to declines in the ruble.

This breaking news story is being updated.