The Board of Directors of the Central Bank of Russia at a meeting on Friday, February 11, raised the key rate from 8.5% to 9.5%. The current value is the maximum since the spring of 2017.

The upward cycle lasts almost a year: since April 2021, the rate, then at 4.25%, has more than doubled. Today’s decision by the Bank of Russia coincided with market expectations. Most analysts surveyed by Bloomberg were counting on just such a scenario.

The main reason for such a step experts called the persistence of high inflation. According to Rosstat, inflation accelerated to 8.7% in January 2022 against 8.4% in December 2021. This value is a record for the last six years.

The central bank revised its inflation forecast to 5-6% from 2022 from 4-4.5%. “Expanding demand continues to outpace the capacity to increase output. Rapid growth in economic activity with limited available labor resources is adding to inflationary pressures. The global commodity market environment remains pro-inflationary. Inflation expectations have not been reduced so far, remaining at multi-year highs,” the financial regulator said in its statement.

Another reason is the growth of geopolitical tension due to the discussion of sanctions against Russia in case of its invasion of Ukraine. Due to political risks, the U.S. currency exchange rate reached 80.4 rubles in January.

The Bank of Russia noted that it admits the possibility of further rate hikes at the next meetings if the situation develops in accordance with the baseline forecast. The next meeting of the Central Bank on the rate will be held on March 18.