The regulator is keeping borrowing costs on hold to contain a more than 20% slump in the ruble this year. The move follows 175 basis points of easing in the past year. Future guidance was dropped from the statement, leaving options open on the future direction of monetary policy.
The bank said the falling rouble, which tumbled to four-year lows this week, posed a significant but short-term upside risk for inflation. The lower exchange rate could prompt inflation to exceed its 4% target this year before returning to it in 2021.
“Slowing growth in both domestic and external demand is a significant disinflationary factor,” the bank said. “It will have a constraining effect on inflation. In this context, given the current monetary policy stance, annual inflation will return to 4% in 2021.”
The central bank has already adopted other measures to try to safeguard the national currency, including daily foreign currency sales, the first interventions of their kind in five years, and a 30-day moratorium on FX purchases.
The ruble firmed on Friday, rebounding from a four-year low reached in the previous session, helped by rising oil prices and ahead of a central bank rate decision later in the day.
The double hit from the slump in oil prices and a fast-developing global health crisis has made the rouble the worst-performing currency against the dollar this year.
An unprecedented 31 central banks across the world have slashed interest rates this week to try to contain the fallout from coronavirus, which threatens to send the global economy into recession. But the central bank of the world’s biggest energy exporter has also been grappling with an oil price slump that’s crashed confidence in Russian assets.