Russia’s central bank keeps key rate at 6% annually

MOSCOW, Mar 20 (PRIME) -- Russia’s central bank has kept its key rate at 6% annually despite recent serious changes in te macroeconomic conditions due to the coronavirus outbreak and oil prices slump, the regulator said in a statement.

“The board of directors of the Bank of Russia decided on March 20, 2020 to maintain the key rate at the level of 6.00% annually,” the statement read.

“The weakening of the ruble is a temporary pro-inflationary factor, and annual inflation may exceed the target (of 4%) this year under its impact. But internal and external demand will have a restrictive impact on inflation connected to a noticeable slowdown in the global economy growth and spreading uncertainty,” the regulator said.

The government and the central bank will ensure financial stability and will support the economy. This will slow annual inflation down to 4% in 2021.

Unfavorable external factors extended pressure on monetary conditions, triggering higher risk premiums in a wide range of financial assets. The yields on the OFZ federal bonds and corporate bonds grew, and some banks started raising interest rates on loans and deposits, but measures of the central bank that limit financial stability risks and softer regulatory demands will support lending.

Nevertheless, the bad external background may result in contraction of the gross domestic product (GDP) in Russia in several coming quarters. The Russian economy will depend on further expansion of the coronavirus pandemic and on measures taken against the COVID-19 disease.

Simultaneously with the key rate decision, the regulator approved measures to support financial stability and the economy. The measures are aimed at maintaining access of small and medium-sized businesses to lending, at supporting mortgage lending, at protection of Russians’ interests hurt by the pandemic, and at easing the administrative burden on the financial sector, the authority said.

End