After this decision regulator domestic currency accelerated its decline
The Board of Directors of the Central Bank in connection with the difficult economic situation, decided to raise its key interest rate by one percentage point – 9, 5% to 10.5%. The regulator said that in case of further strengthening of inflationary risks the Bank of Russia will continue to increase in the key rate.
“In November – early December 2014 acceleration of growth of consumer prices continued. There was an increase in inflation and devaluation expectations, which creates a significant risk of inflation,” – informs the press service of the Central Bank.
“Slower growth in consumer prices will also contribute to low aggregate demand while maintaining the total output of goods and services below the potential level. The monetary policy will ensure the reduction of inflation to the target level of 4% in the medium term. In case of further strengthening of inflationary risks the Bank of Russia will continue to increase in the key rate, “- noted in the report of the Central Bank.
Regulator’s decision will affect the Russians, who used the services of credit institutions. Increase in interest rates by one point would entail growth rates on loans. Experts say that it was a predictable reaction control inflation expectations.
According to the December 8, the annual growth rate of consumer prices was 9.4%, while core inflation in November 2014 rose to 8.9%. The acceleration of inflation affect the continuation of weakening of the ruble and food embargo imposed by Russia in August. However, the rate of rise in price of certain food groups stabilized, which was due to an increase in their proposals by Russian companies and the conclusion of new import contracts, said the central bank.
According to the regulator, inflation in 2014 will be about 10%. The total contribution of the weakening of the ruble, import restrictions and specific factors in the markets of certain food products was up 4.9 percentage points, said the central bank. CB Head Nabiullina said that the preservation of the key rate regulator would cause acceleration of inflation by an additional 11-12%.
The currency market reacted to the news of the rate increase by the Central Bank sharp jump of the dollar and the euro. On the Moscow stock exchange calculations tomorrow dollar traded at around 55.45 rubles, 43 kopecks above the previous day’s close. The European currency also tends upward, leaving far behind the ruble. In the course of trading on the Moscow stock exchange rate of the euro to 14:34 reached 68.98 rubles, ie increased by 62 kopecks to the previous day’s close.
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