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Financial News: Russia CB Holds Rate Unchanged, Sees Diminished Scope

Russia CB Holds Rate Unchanged, Sees Diminished Scope For Cuts In H1

02/03/2017 - 06:13:00 (RTTNews)

(RTTNews) - Russia's central bank on Friday left its key rate unchanged for a third straight session, citing gradually weakening inflation expectations and faster-than-expected economic recovery, and said that the scope for further rate cuts in the near term have diminished.

The Bank of Russia Board of Directors decided to keep the key rate at 10.00 percent, in line with economists' expectations. The previous reduction in the key rate was a 50 basis points cut in September last year.

"Given the internal and external developments, the Bank of Russia's capability to cut its key rate in the first half of 2017 has diminished," the bank said in a statement.

"External political and economic uncertainty remains elevated, which may negatively affect expectations as regards exchange rate and inflation," the bank noted.

Policymakers pointed out that inflation performance has been in line with the forecast, inflation expectations are going down gradually, and the economy is recovering faster than previously expected, the bank said. That said, the slower growth of consumer prices was partially due to temporary factors such as the ruble exchange rate and last year's heavy crop, they added.

Further, the board also said that the purchases/sales of foreign currency in the forex market, which the finance ministry intends to carry out under a transitional budget rule, will not bring considerable inflation risks given the Bank of Russia sticks to its moderately tight monetary policy.

The central bank expects inflation to slow down to the 4 percent target by late 2017 and hold close to this level going forward. The economy is expected to grow this year, albeit modestly.

The next policy session is scheduled for March 24.

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