The bank cited persistent substantial inflation risks for the maintaining status quo and signaled that it may lower the key rate in coming months as inflation slows. While the monetary authority has rolled back most of a December emergency rate increase, a fresh bout of ruble weakness forced policy makers to refrain from easing last time around after five consecutive cuts.
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“We suppose that the rate will be lowered by 50 basis points in December, if the situation on the currency market remains stable and if there won’t be a high probability of the Federal Reserve increaing rates at its Dec. 16 meeting”, Renaissance Capital economist, Oleg Kouzmin, said. “It now looks like the December meeting will be an extremely close call with a distinct possibility that rates will be cut, but much depends on what happens to the ruble and inflation expectations”.
Russia’s central bank on Friday held its key interest rate for the second month running as it balanced worries over inflation against trying to resuscitate its crisis-hit economy.
“Inflation expectations, though having decreased as compared with September, remain elevated”, the central bank said in its statement.
Russian Federation has not changed the key rate since July when it cut it to 11 percent, bowing to the pressure of businesses to make lending more accessible.
The World Bank recently ditched an earlier forecast of a gentle recovery in 2016, predicting instead a further decline of 0.6 percent next year, with a rebound only appearing in 2017.
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The dollar depreciated slightly against the Russian ruble after the rate decision before paring losses. Economists were looking for a half-point reduction to 10.5%. The bank estimates inflation to be 15.6% in October. However, it expected inflation to fall below 7 percent by October 2016 because of moderately tight monetary conditions and weak domestic demand.
