Russian Federation Interest Rate

The Bank of Russia raised its key interest rate by 200bps to 21% in its October 2024 meeting, above market expectations of a 100bps increase, and signaled that it is likely to continue raising interest rates in its upcoming December meeting. The decision lifted the key interest rate to its highest on record, surpassing the extraordinary move that lifted the rate to 20% in response to the crash of the ruble following Russia’s invasion of Ukraine in 2022. The central bank noted that inflation has run much higher than expected in the earlier quarter as domestic demand outstripped the capacity of the Russian economy, which continues to be limited due to Western sanctions and a labor force crisis amid the diaspora of military-aged males since President Putin's military mobilization. Additionally, the marked increase in inflation expectations was magnified by a deterioration in trade conditions and expansionary fiscal policy in the 2024 Federal Budget.