ISTANBUL

The Bank of Russia increased its policy interest rate by 200 basis points to 21%, a historical high level, on Friday.

The bank has raised the rate from 8.5% to 19% since July 2023 through to September and the market expectation was 20% for Friday's meeting.

The bank said inflation is running considerably above its forecast, and inflation expectations continue to increase.

"Growth in domestic demand is significantly outstripping the capabilities to expand the supply of goods and services," it added.

The bank now expects that annual inflation will decline to 4.5-5% in 2025 and 4% in 2026, and to remain on target further on.