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- October 16, 202612°
- BIST10011,722-2.89%
- USD49.42+0.06%
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- INTEREST37.00%-1.00
- BITCOIN81,246-1.08%
- October 16, 202612°
Russia holds interest rate at 14% despite Ukraine-linked fuel pressure
The Central Bank of Russia kept its policy rate unchanged at 14% on Friday. As annual inflation rose to 6.3% as of September 7, the bank said fuel costs linked to Ukraine’s attacks on oil refineries and a temporary decline in production capacity were increasing price pressures.
The Central Bank of Russia left its policy rate at 14%, saying inflationary pressures had not eased enough to justify a rate cut. The bank said high borrowing costs were limiting economic growth, but pressure from rising prices remained.
Annual inflation rose to 6.3% as of September 7. The Central Bank kept its year-end inflation forecast at 6-7% and said it expected price increases to approach the 4% target next year.
Fuel shortages spread through the economy
In recent months, volatile items such as fuel, fruit and vegetables have influenced price movements. The Central Bank cited rising fuel costs linked to Ukraine’s drone attacks on oil refineries and a temporary decline in production capacity among the factors making the fight against inflation more difficult.
Central Bank Governor Elvira Nabiullina said the fuel shortage had spread across the economy. According to Nabiullina, an impact that initially began with fuel prices during the summer created second-round effects that raised prices across a broader range of goods and services as transport costs increased.
Nabiullina also said Russia had been forced to increase imports of petroleum products to replenish its declining stocks. The increase in imports, combined with export bottlenecks, weakened the ruble during the summer and further intensified inflationary pressures.
Temporary pause in rate cuts
The Central Bank described its rate decision as a necessary pause in the rate-cutting cycle. The bank said it would not consider further rate cuts until there was clear evidence that underlying inflation had declined and next year’s government budget plans had become clearer.
The policy rate was cut from 14.25% to 14% at the July 24 meeting. After interest rates remained high for an extended period and weighed on economic growth, the business community called for lower rates to support investment.
Russia’s economy is expected to grow by 0-1% this year, remaining close to stagnation. The Central Bank’s next rate meeting will be held on October 23.
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