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Russia Central Bank Keeps Rate Unchanged At 20.00%

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Russia’s central bank left its key interest rate unchanged on Friday, after raising it sharply at the end of February as the rouble weakened significantly following the invasion of Ukraine.

The Board of Directors of Bank of Russia decided to keep the benchmark rate at 20.00 percent, as widely expected.

The central bank had hiked its interest rate sharply to 20.00 percent from 9.50 percent on February 28. The bank said the decision helped to sustain financial stability and prevented uncontrolled price rises.

“The Russian economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary but inevitable period of increased inflation, mainly related to adjustments of relative prices across a wide range of goods and services,” the bank said.

The central bank assessed that the GDP will fall over the coming quarters. This decline will be mainly driven by supply-side factors, thereby producing a limited disinflationary effect.

However, the stimulus measures taken by the government and the central bank will limit the scale of economic downturn.

The bank observed that the economy faces considerable uncertainty regarding the speed and scale of the adjustment of aggregate supply in response to the recent increase in trade and financial restrictions.

Economic activity and inflation dynamics will be largely impacted by fiscal policy decisions, the bank noted.

The monetary policy is set to enable a gradual adaptation of the economy to new conditions and prevent uncontrolled price rises. According to central bank, annual inflation will return to 4 percent in 2024.

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