Bank of Russia Keeps Key Rate at 4.25%

Russia’s Central Bank kept its key rate again at 4.25% per annum at the first board meeting this year, the regulator said in a press release following the meeting on Friday, TASS reported.

“On 12 February 2021, the Bank of Russia Board of Directors decided to keep the key rate at 4.25% per annum. In December and January, prices continued to grow at an elevated pace. Demand is recovering faster and more sustainably than expected. At the same time, supply-side restrictions are still in place and continue to exert upward pressure on prices. Inflation expectations of households and businesses remain elevated,” the Central Bank said.

The regulator added that it will determine the timeline and pace of a return to neutral monetary policy if the situation develops in line with the baseline forecast. Meanwhile, it will take into account the still high heterogeneity of current economic and price movement trends, actual and expected inflation dynamics relative to the target, economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets.

Macroeconomic forecast

The Bank of Russia maintained its outlook on Russia’s GDP growth for 2021 at 3-4% at Friday meeting. The regulator also expects GDP growth at 2.5-3.5% and 2-3% in 2022-2023, respectively.

Inflation forecast has been upgraded to 3.7-4.2% for this year.

The Central Bank has also upgraded its outlook on the Urals oil price for 2021 and 2022 to $50 from $45 per barrel, whereas the Urals price outlook for 2023 remained unchanged at $50 per barrel.

The capital outflow forecast was kept at $35 bln for 2021, $20 bln for 2022, and $15 bln for 2023.

The Bank of Russia Board of Directors will hold its next key rate review meeting on March 19, 2021.