Russia Central Bank Keeps Key Interest Rate at 4.25%

The Russian Central Bank kept the key nterest rate at 4.25%, suspending its monetary easing cycle in light of the growing risks of imposing new sanctions on Moscow, but hinted that cutting interest rates is still possible later this year.

The decision to keep interest rates at a record low was in line with a Reuters poll that expected Russia to keep the cost of borrowing unchanged following the ruble drop, linked to geopolitical developments.

“If the situation develops in line with the basic expectation, the Bank of Russia will consider the need for another rate cut at its next meetings,” the central bank said.

Low-interest rates support the economy through cheap lending, but this may increase inflation, which is the primary task of the central bank, and make the ruble more vulnerable to external shocks.