Cbank expectedly retains key rate at 4.25% annually

MOSCOW, Sep 18 (PRIME) -- The board of directors of the Russian central bank has decided to retain the key rate at 4.25% annually, the regulator said in a statement on Friday.

“The rate of price growth has developed above the central bank’s expectations over the past months. It is linked to two main factors: active recovery of demand after the lockdown period, weakening of the ruble in light of general growth of volatility on the global markets, and mounting geopolitical risks,” the central bank said.

The maintaining underperformance of Russia’s economy creates disinflation pressure, but a soft monetary policy restrains risks of a severe decrease of inflation from its target in 2021.

According to the authority’s forecast, under the current monetary policy, Russia’s annual inflation will amount to 3.7–4.2% in 2020, 3.5–4% in 2021, and will stay at around 4% in the next years.

Annual inflation rose to 3.6% in August from 3.4% in July, and was seen at 3.7% as of Monday, and inflationary expectations are registered higher.

“After the stage of active recovery, caused by lifting of restrictive measures and introduction of steps of support, ends, the return of both global and Russian economies to their potentials will slow down. It will seize price growth rates,” the central bank said.

“Should the situation evolve in line with the basic scenario, the central bank will consider further reduction of the key rate at its nearest meetings,” it added.

Gross domestic product (GDP) fell 8% on the year in April–June, but it has been recovering faster than expected after the restrictive measures were abolished. Weak external demand is among the factors that constrain economic growth, the central bank said.

There is uncertainty concerning the long-term consequences of the coronavirus pandemic for the Russian and the global economies. Geopolitical factors including rising trade tensions may impact the economies much, it also said.

The next meeting of the central bank’s board of directors to consider further dynamics of the interest rate is scheduled for October 23.

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