Kathmandu, August 16. Russia’s Central Bank announced on Tuesday its decision to raise the key interest rate by 350 basis points, reaching 12 percent.

During an emergency meeting, the bank revealed its intention to increase the interest rate, citing the need to manage price stability risks amidst mounting inflation pressure. “As of August 7, the annual inflation rate escalated to 4.4 percent, while ongoing price growth rates continue to climb,” noted the bank’s statement.

The bank attributed the inflationary pressure to robust growth in domestic demand that has outstripped production capacity. This has not only driven inflation but has also impacted the ruble’s exchange rate dynamics due to heightened demand for imports. “As a result, the depreciation of the ruble is increasingly affecting prices, causing a surge in inflation expectations,” the statement explained.

The bank anticipates that this decision will contribute to reducing inflation to 4 percent by the year 2024. It also disclosed that the next key interest rate meeting is scheduled for September 15, 2023.

According to the Russian Ministry of Economic Development, the annual growth rate of consumer prices is projected to continue accelerating. By the end of August, it is expected to surpass the Central Bank’s target of 4 percent, reaching 4.4 percent, in comparison to the 4.2 percent recorded as of July 24.

In the currency market, the ruble experienced a depreciation, falling to 101 against the U.S. dollar on Monday and maintaining a level of 98 on Tuesday.