Russia's central bank left its main policy rate on hold as expected on Friday, citing inflation concerns, but hinted it may cut it in the months ahead as inflation falls. The bank has now left the rate on hold at 11 percent since July, signalling its determination to bear down on inflation to meet its target of 4 percent by the end of 2017.
It has made clear it regards this as a bigger worry than stimulating the economy, which is expected to contract for a second consecutive year in 2016 under the impact of low oil prices and Western financial sanctions linked to the Ukraine conflict. But in an accompanying statement, the bank also said a rate cut could take place at a "forthcoming" meeting should inflation risks abate. It has previously said this expression means at one of the next three central bank meetings.
"It was a quite a balanced decision," said ING economist Dmitry Polevoy. The reference to a cut at a forthcoming meeting, last made in December, was absent from statements in January and March, when the bank was worried about risks to inflation and financial stability resulting from a fall in oil prices and a weaker rouble. Although most analysts had expected rates to stay on hold, many had also foreseen a softening of rhetoric this month as a strong rally in oil prices has lifted the rouble. Inflation has also dropped sharply, falling to 7.3 percent in March from 16.9 percent a year earlier.
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