Russia’s central bank raised its key rate by 100 bps to 8.50%, the first increase since the invasion commenced. The scale of future adjustments will depend on incoming data and the economy’s reaction to monetary tightening. The depreciation of the Russian ruble expedited the timeline for monetary tightening after months of warnings from the central bank that rate hikes were imminent due to inflationary risks. The central bank noted that the labor force crisis and recent lack of foreign capital inflows continue to pose inflationary risks above 4% YoY. Russia posted a budget deficit of 2.6 tln ruble in H1 2023, as the war spending continues to rise and declining energy prices hampered revenues. Consequently, the government resorted to bond issuances to finance its deficit.