Economy

published : 2023-10-28

Russia Raises Interest Rates for Fourth Time in Half-Year as Inflation Struggles Persist

15% Rate is Twice What it Was in First Half of 2023

An image of a calm Russian cityscape taken with a Nikon D850.

Russia's Central Bank has taken decisive action to combat surging inflation, raising its key lending rate for the fourth time in just six months.

The rate has now been increased to 15%, a significant jump of 200 basis points from the 7.5% rate seen in the first half of the year.

The move comes as current inflationary pressures in the country have surpassed the Bank of Russia's expectations, prompting this bold measure.

In the third quarter alone, seasonally adjusted price growth exceeded a staggering annualized rate of 12%.

For the entire year, inflation is projected to reach approximately 7%, a worrisome figure for the Russian economy.

A photo of an official from Russia's Central Bank discussing interest rates taken with a Canon EOS R5.

However, the Central Bank aims to tackle this issue head-on, projecting a decrease in inflation to around 4% by the year 2024.

By increasing interest rates, the Bank is striving to impede inflation by creating a higher cost of borrowing and encouraging savings.

This course of action is essential as steadily rising domestic demand outpaces the ability to expand the production and provision of goods and services.

Furthermore, inflation expectations continue to linger at elevated levels, causing concern.

The Russian economy is not without its challenges, as sanctions imposed due to the military operation in Ukraine, and increased defense spending have taken a toll.

A snapshot of a bustling marketplace showcasing rising prices taken with a Sony A7 III.

These factors have notably impacted the exchange value of the ruble, which has depreciated by approximately 25% against the US dollar this year.

Russia's Central Bank decision to raise interest rates for the fourth time speaks to the urgency of the situation and the need for measures to stabilize the economy.

It is a step towards mitigating the effects of inflation and ensuring long-term economic viability for the country.