The key rate sets the conditions under which the Central Bank provides funds to commercial banks and attracts them. Interbank market rates are built on it, followed by government bond yields, loan and deposit rates.
Decisions are made by the Central Bank's board at regular meetings, with the schedule published in advance. Rate increases aim to curb price growth, while decreases support economic activity; the choice depends on inflation deviation from the medium-term target.
Previously, the refinancing rate was used as a benchmark; subsequently, the key rate became the primary instrument, consistent with the inflation targeting framework.
For private investors, the consequences are direct but mixed. A rate increase means more attractive conditions for new deposits and bond offerings, but simultaneously reduces the price of already-purchased fixed-coupon securities—more so the higher their duration. Therefore, regulator decisions affect debt portfolios more significantly than individual issuer news.