Central Bank of Russia leaves policy rate unchanged at 4.25% as expected

Russia’s central bank announced on Friday left its policy rate unchanged at 4.25% but reiterated that it will consider the necessity of further rate cuts at its upcoming meetings, as reported by Reuters.

Market reaction

The USD/RUB pushed higher following this announcement and was last seen gaining 1.12% on a daily basis at 73.6748.

Key takeaways from policy statement as summarized by Reuters

“Given the high heterogeneity of current economic and price movement trends, the Bank of Russia will assess the subsequent developments and the existence of a potential for an additional key rate reduction.”

“The Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets.”

“Inflation expectations of households continued to grow, driven mainly by the growth of prices for certain everyday goods and exchange rate volatility.”

“Businesses’ price expectations increased over the previous months and are remain elevated, driven by higher costs. Analysts’ medium-term inflation expectations are anchored close to 4%.”

“Although domestic demand is still exerting constraining influence on price movements, it is offset by proinflationary factors over the short-term horizon.”

“According to the Bank of Russia’s forecast, given the current monetary policy stance, annual inflation will reach in 2021 and will stabilise close to 4% later on.”