Russian Central Bank Leaves Key Rate Untouched at 11%

Despite stabilisation in financial and commodity markets, the Bank of Russia decided to leave its key rate at 11 percent.

MOSCOW (Sputnik) — The Russian Central Bank has left its key rate untouched at 11 percent, the bank's statement said on Friday.

"On 18 March 2016, the Board of Directors of the Bank of Russia decided to keep its key rate at 11.00% p.a. Despite certain stabilisation in financial and commodity markets and a slowdown in inflation, inflation risks remain high. These stem from the current developments in the oil market, persistently high inflation expectations and some uncertainties surrounding budget configuration," the bank said in its press release following the second board meeting held since the beginning of the year.

The Russian ruble reacted swiftly to the announcement, rallying in tomorrow next transactions against the dollar at the Moscow Exchange. The currency traded at 67.866 rubles per dollar at 10:50 GMT, down from 68.626 rubles per dollar 40 minutes earlier.

The continued tight monetary policy conducted by the Russian Central Bank is forecast to be accompanied by annual inflation of under 6 percent between March 2016 and March 2017.

"To enable the accomplishment of inflation targets, the Bank of Russia may conduct its moderately tight monetary policy for a more prolonged time than previously planned. The Bank of Russia predicts that, consistent with this decision, annual inflation will total less than 6% in March 2017, to reach the 4% target in late 2017," the bank said in its press release following the second board meeting held this year.

Inflation in Russia fell from January's rate of 9.8 percent to 7.9 percent in March, and it is expected to fall further in the second quarter, it was noted in the statement.

The Russian Central Bank also forecasts Russia's GDP growth to be in the green by late 2016 or early 2017.

"The economic adjustment to the low level of commodity prices is expected to continue. The Bank of Russia forecasts assume the economic downturn to slow down to 1.3%-1.5% in 2016. Also, it is expected that quarterly GDP growth rates will enter positive territory between late 2016 and early 2017," the bank said in its press release following the second board meeting held this year.

Increasing tendencies of import substitution and rising non-energy exports will aid recovery, the statement added.