Russia's Central Bank retains key rate at 4.25%

Russia's Central Bank retains key rate at 4.25%

At its last meeting this year, the Bank of Russia decided to once again retain the key rate at 4.25% per annum, according to the regulator’s press release.

It indicates a more significant and lasting impact of one-off pro-inflationary factors and an increase in inflationary expectations.

"On December 18, 2020, the Bank of Russia Board of Directors decided to keep the key rate at 4.25% per annum. Inflation is developing above the Bank of Russia’s forecast and is expected to lie within the range of 4.6-4.9% at the end of 2020," ," the regulator said.

One-off proinflationary factors are exerting more significant and prolonged upward influence on prices amid the growth in households’ and businesses’ inflation expectations and supply-side restrictions. The worsening epidemic situation in Russia and worldwide is constraining economic activity significantly less than in 2020 Q2.

The situation in external financial and commodity markets has improved, supported by expectations of faster global economic recovery on the back of vaccine development progress. Disinflationary risks do not prevail in 2021 as much as before, considering the strengthening of short-term proinflationary factors and risks of their influence being more prolonged.

According to the Bank of Russia’s forecast, given the current monetary policy stance, annual inflation will reach 3.5-4.0% in 2021 and will stabilize close to 4% later on," the regulator added.