The Bank of Russia raised its key rate by 0.25 percentage points to 4.5% per annum, this was the first tightening of monetary policy in the country since the end of 2018.
The decision is logical against the backdrop of rising inflation, which is already approaching 6% on an annualized basis. Even at 4.5%, the real rate in Russia will remain negative.

For the financial sector, this means the beginning of a course to increase the cost of loans and, at the same time, to increase interest on deposits. The latter consequence will somewhat smooth out the fall in real incomes of the population. In theory, an increase in interest on deposits by 0.25 p.p. from 32 trillion deposits accounted for an increase in payments to depositors 80 billion rubles. on an annualized basis.

It is also impossible not to recall how the pool of experts from Bloomberg and Reuters was mistaken, whose consensus forecast assumed that the rate would remain at 4.25% until the end of June 2021.