The Bank of Russia's Key Rate Hits Its Record High Since May 2017

On February 11, the Bank of Russia’s key rate was increased by 1 p.p. to 9.5% per annum. This is its highest value since May 2017. The decision was adopted in response to the ongoing inflation acceleration that resulted from an actively expanding aggregate demand, shortage of labor resources, the proinflationary situation on world markets, and high inflationary expectations. The Bank of Russia did not play down the severity of its signal compared to its previous press release, which points to the high probability of a continuing monetary tightening cycle. Annual inflation in January skyrocketed to 8.7%, which is its record high since February 2016. Given the inertia in the movement of annual inflation, it will remain above its target of 4% throughout 2022, to return to the target no earlier than mid-2023