Russia’s foreign exchange reserves surged to $603.7 billion as of May 17, marking a notable increase of $5.3 billion within a week, propelled by positive revaluation, according to the Russian News Agency (TASS).
Citing data from the Russian Central Bank, the country’s foreign exchange reserves witnessed a robust rise from May 10 to May 17, registering an increase of $5.3 billion or 0.9 percent, reaching a total of $603.7 billion.
Steady key interest rate, revised inflation forecasts
Last month, Russia’s central bank opted to keep its key interest rate steady at 16 percent for the third consecutive meeting, acknowledging persistent inflationary pressures, and revised inflation forecasts for 2024. The decision, in line with expectations, underscored Russia’s challenge of achieving the 4 percent inflation target amidst strong consumer demand and labor shortages.
Increased inflation forecast for 2024
Acknowledging the lingering impact of rising domestic demand outpacing supply expansion, Russia’s central bank raised its inflation forecast for 2024 to a range of 4.3-4.8 percent, up from the previous estimate of 4-4.5 percent. This adjustment reflects the bank’s recognition that inflation may take longer to converge to the target than previously anticipated.
In 2023, inflation declined to 7.4 percent from 11.9 percent in 2022. Economists now expect it to largely remain above the 4 percent target this year.
Upward revision in economic growth, current account surplus forecasts
Despite inflationary challenges and high interest rates, the bank revised Russia’s economic growth outlook upward to a range of 2.5-3.5 percent for 2024 from the previous 1-2 percent range. The more positive GDP forecast mirrors the Ministry of Economy’s expectations of 2.8 percent growth this year. Moreover, the central bank increased its forecast for the 2024 current account surplus from $42 billion to $50 billion.
During the first half of 2023, Russia’s central bank cut interest rates to 7.5 percent. However, it gradually reversed its decision with a 20 percent hike in February 2022 after the conflict with Ukraine commenced.
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