Russia Raises Interest Rate to 19% Amid Persistent Inflation

Russia's central bank unexpectedly raised its benchmark interest rate to 19% due to stubbornly high inflation. Analysts predicted the rate would remain at 18%. The central bank highlighted persistent inflationary pressures and risks of entrenchment. The decision was influenced by factors such as inflation data and corporate lending growth.

Russia's central bank made an unexpected move on Friday by raising its benchmark interest rate by 100 basis points to 19%, citing persistent inflationary pressures. This decision comes despite analysts' predictions that the rate would remain unchanged at 18%, signaling deep concerns over economic stability.

The central bank referenced the latest inflation data, which showed stubbornly high figures and risks of becoming entrenched. According to the bank, seasonally-adjusted core inflation accelerated to 7.7% in August from 6.1% in July. Overall inflation saw only a slight reduction, slowing to 9.05% in August from 9.13% in July.

Nabiullina, the central bank's head, suggested that fiscal policies and external economic constraints, contributed to this decision. Projections estimate the full year's inflation at 7.3%, significantly higher than the bank's 4% target. The situation is exacerbated by worsening cross-border payments and disrupted trade due to Western sanctions.