The Central Bank of Russia has kept the key interest rate unchanged. The decision was primarily caused by risks of inflation growth. Moreover, the regulator said that it may conduct its moderately tight monetary policy for a more prolonged time than it was previously planned. Amid the announcement, the Russian ruble advanced and pared some of its losses. As most analysts had expected, the benchmark rate was held at the level of 11%. However, some experts, including Russia’s Minister of Economic Development Alexey Ulyukayev, had anticipated a cut to 10.5%.
Head of the Central Bank of Russia Elvira Nabiullina said that a second year of recession and a record slump in oil prices and the Russian currency aren’t tipping the balance in favor of easing. She also noted that inflation expectations are still rather high.
Nevertheless, the central bank can tighten the monetary policy in case inflationary risks intensify.
“The central bank has become much more consistent in its policy by not yielding to the euphoria of ruble strengthening,” said Yury Tulinov, head of research at Societe Generale SA’s unit Rosbank PJSC in Moscow.
“Despite a certain stabilization in financial and commodity markets and a slowdown in inflation, inflation risks remain high,” the policy makers said in their statement.
While price growth has slowed for six months, the indicator is still twice higher than the targeted level of 4%.
