Inflation in August 2018 and the September Increase of the Key Rate

Alexandra Bozhechkova – Head of Monetary Policy Department of the Gaidar Institute; Senior Research fellow of the Center for the Study of Central Banks, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Pavel Trunin – Head of Center for Macroeconomics and Finance of the Gaidar Institute; Leading Research fellow of the Center for the Study of Central Banks, Institute for Applied Economic Studies, Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences. Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In September the Russian central bank has raised its benchmark interest rate, for the first time since 2014, by 0.25 percentage points to 7.5% p.a. in response to increasing risks of higher inflation, including the Russian rouble 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.

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