The Board of Directors of the Bank of Russia unexpectedly lifted interest rate by 0.25 pp to 4.5% for the first time since 2018.

Most economists, according to Bloomberg consensus forecast, expected the bank to leave interest rate unchanged. 37 out of 40 of the respondents predicted that the regulator would stand pat, two economists predicted an increase of 0.25 percentage points, and one economist - by 0.5 percentage points.

The last time the Central Bank raised the rate was more than two years ago. In 2020, the Bank of Russia in the series of rate cuts drove the rate from 6.25% to 4.25% - in the wake of the COVID-19 crisis. In September, it took a break, and in February 2021 announced that in the future intends to "determine the timing and pace of return to a neutral monetary policy."

The chairman of the regulator Elvira Nabiullina said last week that the Central Bank sees "a steady recovery in business activity and final demand in a wide range of sectors of the economy and notes the increase in inflationary pressures".

The regulator explained the decision taken today as follows: the growth rate of consumer prices in the first quarter is higher than the forecast, the recovery of domestic demand is stable and proceeding faster than previously expected. Inflationary expectations of households and business remain at elevated level. In February, price growth accelerated to 5.7% after 5.2% in January, although inflation expectations in February and March fell slightly by 0.6% to 9.9%.

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