Russian central bank keeps key rate at 11% on high inflation risks

MOSCOW, Apr 29 (PRIME) -- The Russian central bank has kept the key rate at 11% because inflation risks are still too high to reduce it further as inflation expectations are shrinking only slowly, uncertainty about budget revenues and ambiguous dynamics of nominal wages, it said in a statement on Friday.

Annual inflation decreased to 7.3% as of April 25, which is consistent with a forecast made by the central bank a year ago, but deceleration was to a significant extent due to factors, which have a short-term impact, such as pension, salary and tariff adjustment by the government and a global food price dip.

A lower interest rate in the economy will continue even if the key rate remains at the current level because of a planned spending of money from the Reserve Fund to cover budget deficit and as a consequence, a liquidity surplus in the banking sector, the authority said.

But the central bank said that the country’s economy has increased its resilience to the oil price fluctuations and it is approaching a phase of recovery growth. The quarterly gross domestic product dynamics is expected to become positive from July–December 2016 or early 2017.

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