The Central Bank of Russia will continue pursuing the controlled tightening of state monetary policy, implementing the strongest measures since 2014, according to the head of the regulator, Elvira Nabiullina.
The central bank will reportedly consider raising the key interest rate by up to 100 basis points to 6.5%, possibly as soon its July meeting.
“We will discuss the hike ranging from 25 basis points to one percentage point,” Nabiullina said in an interview with Bloomberg, stressing that the decision will be made on the back of data that is currently coming to light.
The key rate has seen three hikes since the beginning of the year. The latest increase, by 50 basis points to 5.5%, came in June.
If the regulator approves the one-time step of increasing the key rate by 100 basis points during the upcoming meeting, the measure will mark the sharpest hike in nearly seven years.
In December 2014, the Russian central bank raised the key rate from 9.5% to 10.5% in response to Western sanctions and crashing crude prices. However, during an emergency night-time meeting, carried out just several days later, the rate was raised to 17%.
According to Nabiullina, the central bank’s push for tightening the policy is attributed to accelerating inflation, rising inflationary expectations, as well as to the fact that demand is currently exceeding supply.
“In line with the increased and unrooted inflationary expectations, this is forcing us to regulate our policies faster than we previously thought,” the regulator's chief said.
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