Russian interest raised in bid to curb inflation

RUSSIA / FSU POLITICS - In Brief 24 Apr 2021 by Alex Teddy
On April 23 the Central Bank of Russia (CBR) raised the interest rate to 5%. It was 4.5%. This is the second rise since March. Inflation is jeopardizing economic recovery. Inflation is up to 5.8% and the CBR's goal is to keep it under 4%.The government has introduced price controls for particular goods. The interest rate hike was the highest that any pundit forecast. The RUB rose in response to the interest rate rise.The Governor of the CBR said Russia will return to its pre-pandemic size in Q3 or Q4 2021. That seems over optimistic.The economy contracted 3% in 2020. This small contraction was partly consequent upon the government eschewing a second lockdown. Retail sales in Q1 2021 had already returned to pre-pandemic levels. The service sector is doing nearly as well.CBR believes that inflation will continue to be a significant headache in 2021 despite the counter-inflationary measures adpoted. CBR would like to restore its ''neutral policy,'' meaning an interest rate that is not too low but does not lead to rising inflation either, or slow growth. Experts predict that the interest rate will rise again to close to 6% in Q3 2021.

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