The Bank of Russia announced the imminent completion of the rate hike cycle

The key rate of the Bank of Russia is being increased further.

The Chief of the Central Bank described the rate rise as a way to prevent an "overheated car" from going out of control.

The dollar saw a moderate increase against the ruble.

At its meeting on Friday, the Bank of Russia increased the key rate to 16% per annum, a 100 basis point rise that was in line with the predictions of most experts.

The Central Bank of the Russian Federation's key rate has now increased for five consecutive times, with the rate now at its highest since April 2022. This is a remarkable increase, considering that the rate was only at 7.5% back in June, having more than doubled in the span of six months.

Inflation pressures remain elevated at present. It is anticipated that by the end of 2023, annual inflation will be close to the upper end of the 7-7.5% range that was forecasted. Additionally, the Bank of Russia has predicted that GDP growth in 2023 will be higher than the October forecast and will surpass 3%.

The Bank of Russia stated in its statement that the Russian economy's upward deviation from the balanced growth trajectory in the second half of 2023 was more pronounced than what was estimated in October.

In November, a new round of monetary policy tightening occurred against the backdrop of rising inflation, which amounted to 7.5%, according to Rosstat. Bank of Russia Governor Elvira Nabiullina noted that the weakening of the ruble over the summer was no longer having an effect on inflation.

The results of an InFOM survey, commissioned by the regulator, showed that in November, the population's inflation expectations and propensity to consume both increased.

At a press conference, Elvira Nabiullina, the head of the Central Bank, warned that without raising the key rate, the Russian economy could have experienced an "overheated car" effect due to not meeting the demand.

The head of the Central Bank noted that, based on the base case scenario, they are likely nearing the end of the rate hike cycle. However, the outcome of this will be largely dependent on the stability of inflationary components.

In response to the regulator's decision, Alfa-Bank, VTB, Rosbank, and Sberbank all raised their deposit yields. Alfa-Bank, VTB, and Rosbank increased their yields to 16%, while Sberbank raised the rates on its “Best%” deposits to 16% and “Best% Leader” to 16.5%.