Central Bank of Russia hikes policy rate by 50 basis points to 5.5% in June

Russia’s central bank announced on Friday that it hiked its policy rate by 50 basis point to 5.5% following its June policy meeting.

Market reaction

The USD/RUB pair edged modestly lower with the initial reaction and was last seen losing 0.22% on the day at 71.6143.

Additional takeaways from policy statement

“Taking into account high inflation expectations, the  balance of  risks has  significantly shifted towards proinflationary ones.”

“Key  rate decisions will take into account actual and  expected inflation dynamics relative to  the  target and  economic developments over the  forecast horizon, as  well as  risks posed by  domestic and  external conditions and  the  reaction of  financial markets.”

Given the  monetary policy stance, annual inflation will return to  the Bank of Russia’s target in  the  second half of  2022  and will remain close to  4% further  on.”

“Increased inflationary pressure in  the  context of  the  completing economic recovery can  lead to  a  more substantial and  prolonged deviation of  inflation upward from the  target.”

“This creates the  necessity of  further increases in  the  key  rate at  upcoming meetings.”