Russian Central Bank: September Rate Hike Not Certain, According to Reuters

By Gleb Bryanski

MOSCOW – A senior official from the central bank stated on Thursday that it is not guaranteed there will be another key interest rate hike in September, citing a slowdown in economic growth and lending. This marks the most dovish tone from the regulator since the rate increase in July.

In July, the bank raised its benchmark rate by 200 basis points to 18%, the highest in over two years, due to concerns about economic overheating and high inflation. The bank’s board is set to meet again on September 13.

Deputy Governor Alexei Zabotkin announced during a news conference that the board will evaluate the necessity of a further increase at upcoming meetings, emphasizing that an increase at the next meeting is not automatic and will hinge on new data.

He noted a decline in consumer and corporate lending during August, although initial inflation data has not indicated any easing in price growth.

On Thursday, the central bank released a draft of its monetary policy guidelines for the next three years. It stated that maintaining a tight monetary policy for an extended period is essential for achieving a consistent reduction in inflation, which currently exceeds 9%.

Under a high-risk scenario outlined in the guidelines, inflation is projected to rise to 13% to 15% by 2025. In a more favorable scenario, it is expected to decrease to 4.0% to 4.5% in the same year as a result of the central bank’s interventions, after which it should stabilize around the 4% target.

The release of these guidelines follows encouraging economic data from Wednesday, which showed robust growth across various sectors and high investment rates, leading officials to suggest a more optimistic outlook for the year despite the impact of Western sanctions.

Additionally, the central bank forecasted a decrease in imports in 2024 due to complications with cross-border payments and logistical challenges arising from Western sanctions.

Russian companies and officials have expressed concerns over transaction delays with China, as Chinese banks have become more cautious and stringent in compliance due to potential secondary sanctions related to dealing with Russia.

The central bank noted, "Imports will decrease in 2024 due to the strengthening of sanctions barriers related to payments and logistics," but it also projected that conditions will improve in the medium term.