MOSCOW, March 18. /TASS/. Russia’s Central Bank has kept its key interest rate unchanged at the rate of 11%, the regulator said in a press release after the board of directors meeting Friday. The key rate has remained unchanged since last August.
The decision to keep the rate unchanged was made amid continued high inflationary expectations, the Bank of Russia said. "Despite certain stabilization on financial and commodities markets and inflation slowdown, inflationary risks are still high. They are related to oil market environment, continued high inflationary expectations, uncertainty over separate budget items," the press release said.
The ruble has accelerated growth following the decision, according to the data on trading on the Moscow Exchange.
As of 01:30 p m MSK the dollar rate decreased to 68.12 rubles, the euro was down to 76.83 rubles. Before the regulator announced the decision on the key rate the dollar was 68.72 rubles, the euro was 77.51 rubles.
Russia’s Central Bank based its updated base case forecast scenario on the average oil price of $30 per barrel for 2016 versus $50 per barrel in its previous scenario.
The regulator said oil prices will gradually rise to $40 per barrel by 2018.
"Taking into consideration the key rate decision, the board of directors of the Bank of Russia relied on expectations of lower oil prices than in the December forecast," the regulator said. Also, the oil market still has an excess of supply amid a slowdown of the Chinese economic growth, increasing oil supplies from Iran and a fiercer competition for market shares, the report said. "Thus a certain oil price recovery seen in recent weeks may turn out unstable," the regulator reported.
Russia’s annual inflation will be less than 6% in March 2017 and 4% at the year-end, the Central Bank said on Friday after the Board of Directors’ meeting.
Inflation risks are still high, the Bank of Russia said. "Despite the oil prices growth and strengthened ruble rate in recent weeks, accumulated ruble weakening under the influence of oil prices collapsed at the end of 2015 - early in 2016 is still contributing to high inflation expectations," the regulator said.
Quarterly inflation will continue declining in the second quarter of 2016, the Bank of Russia said. However, annual inflation may temporarily accelerate mid-year because of the low base effect. Annual inflation will continue slowing down thereafter in absence of new shocks, the regulator said.
Weak demand and gradual lowering of inflation expectations, particularly under influence of the moderately tough monetary policy, will contribute to inflation slowdown.
Inflation in 2016 was forecast at 5.5-6.5%, according to the previous outlook of the Bank of Russia.
The Bank of Russia may pursue its moderately tough monetary policy longer than expected before in order to achieve the inflation target, the regulator went on to say.
Risks remain inflation will be above the target of 4% at 2017 year-end because of a range of factors, including the potentially worsened situation on the oil market and the long term of high inflation expectations, the Bank of Russia said.
Risks of being above the target inflation value are related to such factors as the potential oil market situation worsening, long term of high inflation expectations, global food prices dynamics, changes in rates of tariffs, salaries and pensions, and uncertainty in respect of achieving the mid-term federal budget balance, the regulator said.
Achieving 4% inflation target in mid-term is the primary task of the Central Bank within the scope of the inflation targeting policy. Low and predictable inflation during a long period of time is considered to be a critical criterion of the macroeconomic stability.