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The Bank of Russia will consider an increase in its key rate by as much as 100 basis points at its next meeting on December 17 as inflation continues to run at double its target, Governor Elvira Nabiullina said.
She told reporters that the range is from zero to 100 basis points. She said that inflation is running at the high end of our forecast and we will take that into account, as it's likely that keeping the rate unchanged is the least likely scenario.
The Bank of Russia has raised its key rate by 325 basis points this year, with a 75 basis-point hike at the meeting last month. Inflation is at 8%, the highest since January 2016.
There has not been a significant deceleration in inflationary dynamics, but the bank is likely to take another bold move and lift its key rate by at least 75 basis points, before taking a break in January, said Lilit Gevorgyan, economist at IHS Markit in London.
Nabiullina's comments may suggest that the central bank will respond aggressively to any further upward surprises in inflation. The data will be used to determine the size of the hike, but it will depend on the data over the next week. Tatiana Orlova, economist at Oxford Economics, said the central bank has room for flexibility because price growth is beginning to slow down over the last few weeks. In November, the monthly inflation will be lower than in October, so heavy munitions are not needed, she said.
Nabiullina said it was too early to assess the impact of the Omicron Covid 19 variant on monetary policy. She said there was no reason for the central bank to suspend its regular foreign-exchange purchases despite the recent drop in the ruble.
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