(Bloomberg) --

The Bank of Russia delivered its biggest interest-rate increase since July, surprising most analysts as inflation shows no sign of slowing. 

The Bank of Russia raised the rate 75 basis points to 7.5% Friday, its sixth straight hike. Only one economist in a survey of 44 had correctly forecast the move, with the rest expecting an increase between 25 basis points and 50 basis points.

Bank of Russia Governor Elvira Nabiullina resorted to bold moves as price growth is unyielding, while economic growth started slowing down. The central bank has now boosted rates by a total of 325 basis points this year in an effort to contain inflation, which is running nearly double its target. A slowdown in the economic recovery may be further intensified by new Covid-19 restrictions imposed by authorities this week. 

Nabiullina will hold an online news briefing at 3 p.m. Moscow time. Follow our live blog here.

Key Insights:

  • Inflation is expected to slowly ease after October peak. Annual inflation accelerated to 7.78% as of Oct. 18, according to the Economy Ministry, which raised its year-end forecast to 7.4% from 5.8% earlier this month.
  • Household inflation expectations for the year ahead jumped to 13.6% in October, the highest since late 2016.
  • Expectations of more rate increases, along with rising oil prices, have helped make the ruble one of the top-three performers among major emerging markets so far this month.
  • After Brazil, Russia has been one of the most aggressive among emerging markets in raising rates to combat rising inflation this year. By contrast, Turkey this week surprised with a big cut, pushing the lira lower.


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