“These factors stem from current developments in the oil market, the persistently high expectations about inflation and uncertainties surrounding budget configuration”, according to the national banking regulator.
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MOSCOW-The Bank of Russian Federation sees a risk of oil prices dropping to $25 a barrel for a prolonged period, but would like to avoid raising rates again, the central bank’s governor said Friday.
The key interest rate has remained unchanged at 11 percent since August 2015, after the Central Bank gradually lowered the rate from 17 percent, the highest level set in December 2014.
The Russian currency was trading at 68.04 to the dollar after falling to a historic weak point in January.
“Despite a certain stabilization in financial and commodity markets and a slowdown in inflation, inflation risks remain high”, the CBR said in a statement. Despite reasons to be cheerful, however, analysts cited by TASS noted that the case for holding rather than cutting rates was not clear cut, however, and the central bank did not rule out increasing rates last month. While inflation has been steadily trending downwards, at 8.1 percent as of February, on a weekly basis inflation rose in early March signaling that the trend might not be as solid as hoped.
They think inflation will fall below 6.0 percent by this time next year and reach the bank’s 4.0 percent target by the end of 2017.
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The central bank now expects gross domestic product to contract by between 1.3 percent and 1.5 percent in 2016.
