Central Bank to decide about policy rate this week

Members of the Central Bank's Monetary Policy Committee will meet on July 20 to decide about its key interest rate.

At the MPC's June meeting, the policy rate - the one-week repo auction rate - was lifted from 8.5 percent to 15 percent. This was the first rate hike since March 2021.

The markets expect the Central Bank to continue with the monetary tightening at this week's rate-setting meeting, with some analysts even suggesting 500 basis points hike in the policy rate to 20 percent.

In a statement released after the June 22 meeting, the bank said it decided to begin the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior.

"Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved," it added.

The annual inflation rate slowed from 39.59 percent in May to 38.2 percent in July. Analysts think that inflation may have started to rise again.

The Central Bank's survey of market participants released on July 14 showed that inflation expectations for the end of 2023 increased to 43.8 percent from a previous 38.55 percent.

Respondents to the survey also revised upwards their 12-month ahead inflation forecast from 30.65 percent to 33.21 percent.

In the statement released after the June meeting, the bank also said that to increase the functionality of market mechanisms and strengthen macro financial stability, the committee will simplify and improve the existing micro- and macroprudential framework.

The Central Bank will hold eight more rate-setting meetings until the end of 2023...

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