Russia holds key rate at 4.25

Russia’s central bank held its key interest rate at a record low of 4.25% on Friday following a recent jump in inflation, a move that suggests further monetary policy easing could be off the table due to higher inflation.

The decision, to keep the rate at a level unchanged since July 2020, was in line with a Reuters poll that forecast Russia would keep the cost of lending as is due to an ongoing rise in consumer prices following the rouble’s depreciation.

“Disinflationary risks no longer prevail over the horizon of 2021,” the bank said in a statement.

The central bank said it would now “determine the timeline and pace of a return to neutral monetary policy.”

When making rate decisions in the future, it would take into account economic and price movement trends, inflation, as well as risks posed by domestic and external conditions and the reaction of financial markets, it added.

The central bank’s move means it has shrugged off an International Monetary Fund’s call for lower rates.

It said inflation, its main area of responsibility, risked overshooting its 4% target this year because inflation expectations remain elevated.

Lower rates support the economy through cheaper lending but can also fan inflation and make the rouble more vulnerable to external shocks.

The central bank started cutting rates in early 2020 when the economy took a hit from a plunge in prices for oil, Russia’s main export. Fallout from the coronavirus pandemic and lockdowns that hurt business activity have also buffeted the economy.

The central bank said it had kept its 2021 economic growth forecast at 3-4% after the economy shrank 3.1% last year. That contraction, though smaller than the central bank had predicted, was the sharpest in 11 years.

The rouble did not react much to the decision, trading at 74.22 against the U.S. dollar after it was announced .

Elvira Nabiullina, governor of the central bank, will shed more light on the central bank’s forecasts and monetary policy plans at an online news conference at 1200 GMT.

The next rate-setting meeting is scheduled for March 19.

(Reporting by Andrey Ostroukh, Gabrielle Tetrault-Farber, Elena Fabrichnaya, Alexander Marrow, Maria Kiselyova, Katya Golubkova; Editing by Andrew Osborn)

Source: Reuters

What's your reaction?

In Love
Not Sure

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *

More in:News