Bank of Russia Eyes Another Key-Rate Hike at Meeting Next Week

The Bank of Russia will consider raising its key rate by 25 or 50 basis points, or possibly keeping it unchanged, at next week’s meeting, top officials said Thursday.

Governor Elvira Nabiullina said Thursday that options under consideration on June 11 will include leaving the rate unchanged as well as increasing it, adding that it’s premature to talk about possible increments for a hike, Tass reported. First Deputy Governor Ksenia Yudaeva said a hold is less likely, while an increase of 25 or 50 basis points is possible, according to Interfax.

The bank’s board currently is leaning toward a 25-basis-point hike, a person familiar with the discussion said, speaking on condition of anonymity to comment on matters that aren’t public. Policymakers often adjust their thinking in the days and hours leading up to the decision.

Speaking at the St. Petersburg International Economic Forum, Nabiullina warned that recent rises in inflation are driven by lasting factors and the central bank is determined prevent an inflationary spiral from taking hold.

Finance Minister Anton Siluanov said the economy is “overheating,” with inflation now running at an annual rate of 5.9%. That’s well above the central bank’s 4% target.

Sixteen economists expect a 25 basis-point rate hike, while six forecast a bigger move and one sees no change, according to a Bloomberg survey. Forward-rate agreements are pointing to more than 80 basis points of increases over the next three months. So far this year, the central bank has raised rate by 75 basis points.

“The probability of a 50 basis-point rate increase is lower than the last time, but still is high,” Dmitry Dolgin, chief economist at ING Bank in Moscow, said about the comments from the central bank on Thursday. He expects the central bank to use a smaller step next week.

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