Russia: OPEC+ Decision Supports The Budget Plan

Today, the Russian Central Bank raised the main interest rate to 4.5% in light of inflationary risks and at the geopolitical level, and hinted that more will follow.

The decision to raise interest rates, from a record low of 4.25 percent, contrasted with a Reuters poll that expected Russia to keep the cost of borrowing unchanged for the last time before it embarks on a cycle of raising interest rates.

“The balance of risks has shifted towards factors favorable to inflation … the Bank of Russia remains open to the possibility of further increases in the main interest rate in future meetings,” the bank said in a statement.
The Russian central bank’s move came after a recent devaluation of the ruble due to fears of sanctions. This is consistent with two decisions by the Brazilian and Turkish central banks to sharply raise interest rates this week.

“The favorable risks of inflation in the short term are also linked to more severe fluctuations in global markets driven by many geopolitical developments, among other factors, which may have an impact on the exchange rate and inflation expectations,” the Russian central bank said.
He added that inflation will return to the target rate of 4 percent in the first half of next year, which is later than previously expected.

The bank said annual inflation was 5.8% on March 15 but expected to slow soon.

The bank is due to hold its next interest rate meeting on April 23.