Russia Maintains Key Interest Rate at 21%, Defying Expectations

Contrary to expectations of a rate hike, the Central Bank of Russia has kept its key interest rate at 21%.

According to TASS on the 20th (local time), the Central Bank of Russia announced that it would maintain the key interest rate at 21%, while assessing the need for a rate increase at the next meeting.

The Central Bank of Russia explained, "Monetary conditions have become tighter than expected during the rate decision in October," attributing this to "effects caused by independent factors in monetary policy."

It continued, "As loan rates have risen significantly and credit activity has cooled, monetary conditions have tightened, leading to a process where inflation is easing despite current price increases and high domestic demand," adding, "The prerequisites necessary to return inflation to target have been established."

Previously, experts anticipated that Russia would significantly raise the key interest rate to curb soaring prices.

Russian media RBC reported that most economic analysts expected Russia's key interest rate to rise to 23% or higher.

Russia has been pursuing a policy of raising the key interest rate to control inflation, which surged due to increased government spending for military operations related to Ukraine.

The Central Bank of Russia has continuously raised the key interest rate since increasing it from 7.5% to 8.5% in July last year.

In October, it was raised by 2 percentage points from 19% to 21%. Although it was frozen this time, the 21% rate remains at a historic high level for Russia. The previous high was 20% in February 2022, right after the start of the special military operation in Ukraine.

Reporter Goh Jung-sam, Hankyung.com jsk@hankyung.com