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Bank of Russia Tightens Its Monetary Policy in Response to Accelerated Inflation

Alexandra V. Bozhechkova – Head of Monetary Policy Department of the Gaidar Institute for Economic Policy; Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Pavel V. Trunin – Head of Center for Macroeconomics and Finance of the Gaidar Institute for Economic Policy; Director of Center for Сentral Banks Studies of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

At its Board of Directors meeting in June, the Bank of Russia raised the key rate for the third time since the beginning of the year, by 0.5 p.p. to 5.5% per annum. This decision was caused by an accelerated inflation triggered by reviving demand as the containment measures were being lifted, alongside the ongoing super-loose fiscal and monetary policies in the majority of countries, rising prices in world commodity markets, and increasing inflationary expectations. As seen by the results of May 2021, inflation in annual terms reached 6% and, according to our estimates, its year-end index year will be at least 5.3%, which points to a high probability of continuing monetary policy tightening.

Key words: inflation, monetary policy, key rate, capital outflow, Bank of Russia.

JEL-codes: E31, E52, F31.