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Russia keeps key policy rate unchanged

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Staff Writer | October 29, 2016
Russian central bank
Russian economy   Gross domestic product is set to fall

Russia's central bank held its key policy rate unchanged, following a reduction in September, as policymakers assessed that inflation slowdown was not yet sustainable.

The board of the Bank of Russia decided to keep the key rate at 10.00 per annum, the Bank of Russia said in a statement. The decision was in line with economists' expectations. In September, the bank had cut the rate by 50 basis points.

Policymakers judged that the dynamics of inflation and economic activity were overall in line with the forecast and inflation is slowing down largely due to temporary factors. The deceleration in inflation expectations remains unsteady, the bank pointed out.

"For the trend towards inflation slowdown to become sustainable, according to Bank of Russia estimates, it is necessary to hold the current key rate throughout 2016, with its potential downgrades due in 2017 Q1-Q2," the bank said.

"Given this decision and considering that the moderately tight monetary policy is maintained, annual growth in consumer prices is set to total less than 4.5 percent for October 2017, dropping to the target level of 4 percent by the end of 2017."

Policymakers will assess inflation risks alongside with the alignment of inflation dynamics and economic performance with the baseline forecast, while deciding on interest rates in future.

Gross domestic product is set to fall 0.5-0.7 percent this year, while the fourth quarter is expected to post a slight quarterly growth, the central bank said. In 2017, economic growth is expected to be below 1 percent.

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