Russia’s central bank keeps key rate at 11%

MOSCOW, Jan 29 (PRIME) -- The Russian central bank has kept its key rate unchanged at 11%, the regulator said in a press release Friday.

The central bank made the decision “taking into account the current economic situation, with increased risks of a further economic slowdown due to the fall of oil prices.”

The regulator expects annual inflation to slow down to around 10% in January from 12.9% in December 2015. Consumer prices are projected to grow 8–9% in January–March, and there are risks for inflation to accelerate in April–June, the regulator said.

The central bank also expects annual inflation to slow down to less than 7% in January 2017 and reach the target level of 4% by the end of 2017.

The regulator said it could tighten its monetary policy if the inflationary risks grow.

“If the oil prices remain low for a long period, this will lead to a further increase of inflationary risks and risks for financial stability, as well as to a necessity of a more large-scale adaptation of the economy to new conditions,” the central bank said.

The gross domestic product (GDP) decline may exceed 0.5–1% encompassed by a basic scenario, but the economic growth is likely to resume in 2017, the central bank said.

“Oil prices in 2016–2017 will likely be lower than it was expected in the basic scenario. The floating rate will partially compensate the negative impact of low energy prices on the economy. However, a further adaptation of the account balance and economy to the decreased level of global prices for main goods of Russian exports will be required,” the regulator said.

“As a result, the GDP decline in 2016 will be more significant than it was forecasted in the basic scenario. A period of additional adaptation can take several quarters. GDP will resume growth in 2017, but the pace will be low,” the regulator said.

The central bank has scheduled the next meeting devoted to the key rate for March 18.

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