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Russia’s central bank announced on Friday left its policy rate unchanged at 4.25% but noted that it will consider the possibility of further rate cuts.

Additional takeaways from the policy statement

“Inflation seen at 3.7-4.2% in 2020. In 2021, it will be close to 4%.”

“Growth of prices slightly above forecast.”

“If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings.”

“This is driven by two key factors: an active recovery of demand after the lockdown as well as the weakening of the ruble on the back of generally increased volatility in global markets and higher geopolitical risks.”

“Inflation expectations of households and businesses remain elevated.”

“Although the effect of short-term proinflationary factors has strengthened, disinflationary risks still prevail in the medium run.”

“As the stage of lively recovery growth owing to restriction lifting and support measures complete, the pace of return of the global and Russian economies to their potential will slow down.”

“This will have a constraining effect on price growth rates.”

“In its key rate decision-making, 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 factors.

Market reaction

The USD/RUB pair’s reaction was largely muted and it was last seen losing 0.17% on the day at 75.0785.