Central Bank of Russia hikes policy rate by 25 basis points to 4.5% in March

Russia’s central bank announced on Friday that it hiked its policy rate by 25 basis point to 4.5%. "The balance of risks has shifted towards proinflationary ones," the bank noted in its policy statement.

Market reaction

With the initial market reaction, the USD/RUB pair fell sharply and was last seen losing 0.7% on the day at 73.7947.

Key takeaways as summarized by Reuters

"Given the current monetary policy stance, annual inflation will return to the Bank of Russia’s target close to 4% in the first half of 2022 and will remain at that level further on."

"The Bank of Russia will continue to determine the timeline and pace of a return to neutral monetary policy taking into account actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets."

"The fast recovery of demand and elevated inflationary pressure call for a return to neutral monetary policy."

"The Bank of Russia holds open the prospect of further increases in the key rate at its upcoming meetings."