World Economy

Russia CB Says Rate Cut Less Likely in H1

Russia CB Says Rate Cut Less Likely in H1Russia CB Says Rate Cut Less Likely in H1

Russia’s central bank kept its key rate unchanged and suggested it would hold off cutting borrowing costs for now in the face of external political and economic uncertainty.

The announcement came after the finance ministry said it would start buying foreign currency in a bid to rein in the rising ruble, AFP reported.

As widely expected, the central bank kept its rate unchanged at 10% as part of what it describes as “moderately tight monetary policy.” Furthermore, “given the internal and external developments, the Bank of Russia’s capability to cut its key rate in the first half of 2017 has diminished,” it said in a statement.

“External political and economic uncertainty remains elevated,” it continued, without specifying further. And that uncertainty “may negatively affect expectations as regards exchange rate and inflation.”

The central bank opted to maintain the status quo, despite a slowdown in inflation to 5.1% year-on-year by the end of January—one of the lowest rates in the post-Soviet period.

Russia’s target is for inflation of 4% this year.

“Risks remain that inflation will be above the target level of 4% in 2017,” the central bank said, while adding these risks “are abating” in the mid-term.

Russia’s central bank last cut its interest rate by half a percentage point to 10% in September last year.

It opted to keep the rate unchanged in December and said at the time that it would hold off on another cut until early 2017 at the earliest.

Russia hiked borrowing costs massively in late 2014 as the crisis caused by falling oil prices and western sanctions over Ukraine sent the ruble tumbling.


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