MOSCOW, March 21. /TASS/. The board of directors of the Bank of Russia has decided to keep the key rate at 21% per annum, noting that it might consider raising the rate unless disinflation dynamics ensure achieving the 4% inflation target.
"On March 21, 2025, the Bank of Russia Board of Directors decided to keep the key rate at 21% per annum. Current inflationary pressures have decreased but remain high, especially underlying ones," the regulator said in a press release.
That said, the current price growth in February and early March was partly constrained by a stronger ruble since the beginning of the year, the Central Bank added. Annual inflation in Russia totaled 10.2% as of March 17.
The achieved tightness of monetary conditions creates the necessary prerequisites for returning inflation to the target in 2026, the regulator said, adding that achieving the inflation target will require a long period of maintaining tight monetary conditions in the economy.
The Bank of Russia will continue to assess the speed and sustainability of the decline in inflation and inflation expectations. If disinflation dynamics do not ensure achieving the inflation target, the Bank of Russia will consider raising the key rate.
The balance of inflation risks is still tilted to the upside, the regulator noted.
"The key proinflationary risks are associated with the ongoing upward deviation of the Russian economy from a balanced growth path and high inflation expectations, as well as with the deterioration in the terms of external trade. Disinflationary risks involve a more significant slowdown in lending growth and domestic demand under the impact of tight monetary conditions. If geopolitical tensions ease, external conditions may improve, which might have a disinflationary effect," the press release said.
The Central Bank also considers the upward deviation of the Russian economy from a balanced growth path still significant. "High domestic demand is backed up by rising household incomes and budget expenditures. However, high-frequency data and surveys of businesses indicate more moderate growth in economic activity in early 2025 compared to 2024 Q4," the regulator said.
Monetary conditions remain tight under the impact of the monetary policy pursued and autonomous factors. "Although nominal interest rates went down after the February meeting in most segments of the financial market, their decrease in real terms was not so significant, given the lower inflation expectations. Non-price bank lending conditions remain tight," according to the document.
The Bank of Russia also stressed that the labor market remains tight, with unemployment at its record lows, but growing evidence of easing tightness in place.
"According to surveys, the share of enterprises experiencing labor shortages continues to shrink. In addition, labor demand in certain industries has been decreasing with a reallocation of employees across industries. Meanwhile, wage increases remain high and continue to outpace labor productivity growth. The December statistics on wages were also affected by partial rescheduling of annual bonus payments from 2025 Q1. This supported consumer demand at the beginning of 2025," the regulator said.
Given the monetary policy stance, annual inflation is expected to decline to 7-8% in 2025, return to 4% in 2026, and stay at the target further on, the Bank of Russia said.