Russia Keeps Key Interest Rate Unchanged At Record High 21%

(RTTNews) - The Bank of Russia retained its interest rate at a record high for the second consecutive meeting on Friday and kept the door open for further rate hike as inflationary pressures remain high.

The board of directors, governed by Elvira Nabiullina, maintained the key interest rate at a record 21.00 percent.

The Russian central bank has raised the key interest rate by 1,350 basis points since July 2023.

Policymakers observed that the current inflationary pressures remain high. The bank said it will assess the need for a key rate increase at its upcoming meeting, taking into consideration the speed and sustainability of the inflation slowdown.

"The baseline scenario provides that returning inflation to the target will require a longer period of maintaining tight monetary conditions in the economy than it was forecast in October," the bank said.

The bank raised its inflation forecast for this year to 7.0-8.0 percent from 4.5-5.0 percent. Price growth is expected to return to 4.0 percent in 2026 and stay at the target further on.

Regarding economic growth, the bank said the Russian economy expanded 4.1 percent in 2024, which was slightly stronger than previously estimated due to higher domestic demand growth.

Capital Economics' economist Nicholas Farr said inflation is likely to rise further over the coming months as the war continues to push the economy up against capacity constraints.

Despite recent calls among businesses and politicians for monetary loosening, a pivot to interest rate cuts is unlikely until at least the second half of the year, the economist noted. The policy rate is set to end this year at 18.00 percent.