Russia’s central bank keeps interest rates at 20% but warns of significant uncertainty

A national flag flies over the headquarters of the Central Bank of the Russian Federation in Moscow.

Andrey Rudakov | Bloomberg | beautiful pictures

Russia’s Central Bank on Friday kept monetary policy steady and kept its key interest rate at 20%, but warned of significant uncertainty as the economy undergoes a “transitional structural transformation”. large tissue.”

In late February, shortly after Russian forces invaded Ukraine, CBR more than doubled the country’s key interest rate from 9.5% to 20% in an effort to prop up the plunging currency and mitigate the impact of tough international sanctions.

In a statement on Friday, the CBR said the sharp increase in the key exchange rate “helped maintain financial stability.”

“The Russian economy is entering a period of large-scale structural transformation, which is followed by a temporary but inevitable period of increased inflation, which is mainly associated with adjustments in relative prices across a wide range of categories. goods and services”.

“The monetary policy of the Central Bank of Russia is set to allow the economy to gradually adapt to new conditions and bring annual inflation back to 4% by 2024.”

The ruble sank to a record low against the dollar following a series of new sanctions and penalties imposed by the US and its European allies on Moscow, before correcting in recent weeks. The coin is just over $103 after Friday’s decision.

Earlier this week, Russia tried to avert a historic default by completing some of its sovereign bond payments in dollars, according to Reuters. The Russian Ministry of Finance on Friday said it had fully met its obligation to pay off coupons for Eurobonds in dollars.

The CBR’s large amount of foreign currency reserves have been targeted by Western sanctions aimed at making them nearly inaccessible, preventing policymakers from mitigating the asset’s decline. domestic.

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