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Russian C.bank leaves key rate unchanged

Russian C.bank leaves key rate unchanged

Mubasher: The Russian central bank held its policy rate at its current level, chiming with market expectations, but hinted it could cut it later this year, as inflation is set to slow down.

The Central Bank of Russia (CBR) decided to keep its key interest rate at 7.75%. Analysts polled by Thomson Reuters projected that the current inflation would not require a rate hike.

This is the second time the CBR has held its rate unchanged this year, as it aims for inflation to return to its 4% target next year.

“If the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of turning to cutting the key rate in 2019,” the central bank said in a statement.

Inflationary outlook remained elevated following two rate hikes last year which aimed to rein in inflation, the central bank said.

The bank expects annual inflation to slow to a range from 4.7% to 5.2% by the end of the year, compared with up to 5.5% previously expected.

Inflation was lower than expected because of the moderate impact of a value-added tax (VAT) hike, the bank said.

In reaction to the decision, the Russian ruble (RUB) stood nearly firm against the US dollar to RUB 64.25, retreating from a level of RUB 64.30.