Bank of Russia leaves policy rate at 16%, flags rate hike

The Bank of Russia (CBR) left its key policy rate without change at 16% for a fourth consecutive meeting in June, in line with market expectations.

However, the central bank warned that it might raise interest rates at its next policy meeting, as domestic demand continued to outpace the limited current capacity of the nation’s economy.

This creates an imbalance between aggregate supply and demand and also spurs inflation risks, the CBR noted.

The imbalance is still attributed to the fallout from Russia’s special military operation in Ukraine and the responses of sanctions imposed by the West.

The country is also facing a labor crisis, since working-aged men left the Russian Federation seeking to escape military mobilization.

Overall, the Bank of Russia said that restrictive monetary conditions would need to remain in place for a longer period than anticipated in April.

Previously, the CBR had said the benchmark policy rate was not expected to fall below 15% in 2024.

The Russian Ruble was last 0.78% stronger on the day against the US Dollar, with the USD/RUB currency pair trading at 88.6370.