Macro
Bank of Russia holds its key rate at 14% and raises its year-end inflation forecast to 7.1%–7.6%
Underlying inflation has yet to ease, the central bank said, as fuel costs and capacity constraints keep price growth well above its 4% target.
HedgeWeekly News Desk ·
Russia's central bank left its key rate unchanged at 14% on Friday, a decision analysts had widely expected, and said underlying price growth has not yet started to slow. The bank now sees annual inflation at 7.1% to 7.6% at the end of 2026, a slight upgrade, with annual inflation running at 6.8% as of October 19.
The policy statement showed a marked pickup in price pressure over the summer. Seasonally adjusted inflation averaged 8.0% on an annualised basis in the third quarter, up from 4.8% in the second, and core inflation rose to 6.2% from 4.5%. The bank put underlying inflation at 5% to 6% and pointed to volatile items, chiefly motor fuel, as well as temporarily reduced production capacity in some industries. Ukrainian strikes on refineries have pushed up gasoline and diesel costs, The Moscow Times reported.
The bank now expects its key rate to average 12.5% to 13.5% in 2027, a range The Moscow Times said is 2 percentage points higher than before, while still forecasting inflation back at 4% next year. It said pro-inflation risks dominate, including wage growth that outpaces productivity and global price pressure tied to geopolitical tensions, and described monetary conditions as moderately tight. Corporate borrowing was elevated in the third quarter, though banks have tightened credit standards for companies.
Why it matters: A higher assumed path for rates next year signals that Moscow's easing cycle has stalled at a time when energy is again feeding inflation worldwide; The Moscow Times noted oil topped $114 a barrel on Friday for the first time since May. Investors tracking emerging-market policy and commodity-driven inflation should watch the bank's summary of its rate discussion on November 5 and its next decision on December 18. One local economist quoted by The Moscow Times read Friday's statement as neutral, leaving the door open to a cut before year-end.