Key Interest Rate Moves Up : Causes and Effects

In September the Russian central bank has raised its key interest rate, for the first time since 2014, by 0.25 p.p. to 7.5% p.a. in response to increasing risks of higher inflation, including the Russian ruble devaluation (induced by new sanctions against Russia and by capital outflows from emerging markets on the back of tightening US Fed's monetary policy) as well as the expected VAT hike scheduled for 2019. Although the above risks have realized only in part, the central bank has had to raise its 2019 inflation forecast to 5.5% and to adopt a tighter monetary policy