Bloomberg: Strikes on refineries have accelerated inflation in Russia. This may stop the rate cut

Russia's central bank may suspend or slow down the cycle of key interest rate cuts due to rising inflationary pressures caused by Ukraine's strikes on oil refineries and planned tax hikes. About writes Bloomberg.

The Russian economy is suffering from high interest rates, which the Central Bank began to lower only in June.

Currently, the key policy rate in the country is 17%. Half of the economists expect it to be cut, while the rest expect the regulator to leave the rate unchanged. The decision will be announced on Friday, October 24.

"The recent acceleration of price growth and rising inflation expectations limit the room for rate cuts," said Andriy Melashenko, chief economist at Renaissance Capital.

According to him, the Central Bank of the Russian Federation will either refrain from making changes or limit itself to a small decrease of half a percentage point.

Inflation in Russia accelerated again after a brief period of stability. This was influenced by both seasonal factors and fuel shortages due to Ukrainian attacks on refineries, pipelines and marine terminals.

Gasoline prices in Russia rose by 3% in September and by another 2% in October. Government initiatives are creating additional pressure.

The increase in the value-added tax (VAT) from 20% to 22%, scheduled for 2026, is intended to finance rising military spending. The central bank estimates that this will add 0.6-0.8 percentage points to inflation.

New US sanctions against Russia's largest oil companies have become an additional challenge. They are reducing revenues from energy exports and could further deteriorate the economy.

• On the night of October 18, Russians reported a drone attack on a substation in the village of Veshkaima, Ulyanovsk region. The head of the Center for Countering Disinformation at the National Security and Defense Council said that the strikes the Russians have lost this facility.