Russia Will Do A Fast Tightening

The Central Bank of Russia is planning to increase the interest rates by 125 basis points this year.

Russia will do a fast tightening. A source who made a statement to Bloomberg and had knowledge on the subject noted that the Central Bank of Russia was considering a 125 basis point increase in interest rates in 2021. Recent polls have pointed out that economists expect Russia to see a 50 basis point rate increase this year. According to the source's statements, the Central Bank of Russia will move faster than it previously signaled to tighten monetary policy. Accordingly, the bank is likely to increase its policy rate by 125 basis points or more until the end of 2021. The source, who preferred anonymity due to the fact that the discussions on the matter were not open to the public, stated that the rise in inflation and concerns about the government's plans to increase public spending mean that the central bank could raise the policy rate to 5.5 percent or 6 percent in a few steps. The policy rate in the country is at the level of 4.25 percent. If such a rapid step towards tightening is taken, it will mean a dramatic turn for the bank, which previously announced that it will maintain its supportive stance in monetary policy throughout 2022 in order to maintain the recovery in the economy. Economists who took part in the Bloomberg survey anticipate a 50 basis point rate increase from the Russian Central Bank in 2021.