The Russian Central Bank (BCR) announced on Friday that it would once again maintain its key rate at 16% in an attempt to limit inflation, driven in particular by the explosion of the federal budget, President Vladimir Putin having called the day before to remain “cautious “.
The BCR’s key rate was raised several times between the summer and the end of 2023, finally reaching 16%, with the aim of curbing the inflation which is weighing down the purchasing power of Russians. The Russian Central Bank therefore considered that it was still premature to lower the key rate, the price increase having officially reached 7.8% as of April 22, well beyond the authorities’ target of 4%.
Current inflationary pressures are gradually easing but remain high, the BCR said in a press release. Due to still high domestic demand, which exceeds (…) supply, inflation will return to the target a little more slowly than what the BCR had forecast in February, she stressed.
Faced with Russian employers, Vladimir Putin called on them on Thursday to be cautious and not to rush to lower rates. The threat of inflation (…) still weighs on us, he warned, at a time when the explosion of federal spending, driven by military orders for the front, has accelerated the inflationary spiral.
Faced with business representatives, the Russian president notably cited the example of Turkey which, despite a key rate currently at 50%, cannot stem the surge in prices. If we go in the other direction (by lowering the key rate, editor’s note), we risk finding ourselves in a situation similar to that of certain neighboring countries, where inflation is double digits (…) These have crossed a kind of threshold and can no longer cope with it, Vladimir Putin warned.
The outlook for the Russian economy has, however, been better for several months now, which the IMF confirmed in mid-April, with the institution now counting on growth in the country of 3.2% in 2024. The surge in prices remains there. one of the main concerns of the Russian population, whose purchasing power is weighed down by the effect of numerous Western sanctions and due to the weakening of the ruble in relation to the dollar and the euro.