"Russia's central bank Friday left its key interest rate unchanged for a fourth straight meeting, despite a continuing rise in inflation driven by the diversion of men and material to the conflict of Ukraine.
The Bank of Russia left its key rate at 21%, the highest level recorded since the full-scale conflict in early 2022.
The central bank said it would be necessary to keep borrowing costs at a high level for a long period to return inflation to its target.
It also warned that the rise in U.S. tariffs on the rest of the world could push inflation higher, by reducing demand for Russian oil and thereby weakening the ruble.
"A further decrease in the growth rate of the global economy and oil prices in case of escalating trade tensions may have pro-inflationary effects through the ruble exchange-rate dynamics," it said.
While price rises have slowed in much of the rest of the world, and interest rates are falling, Russian inflation has risen over recent months as the government devotes more manpower and other resources to sustain the activity. Consumer prices in March were up 10.3% higher from a year earlier, a faster pace than in February and well above the central bank's 4% target.
The central bank said the economy has slowed in the first quarter, but nevertheless shows an "upward deviation. . .from a balanced growth path," while household expectations for future inflation remain elevated.
To cool the economy down, the central bank said its average key interest rate will likely be between 19.5% and 21.5% this year, and between 13.0% and 14.0% in 2026.
Boosted by production of weaponry and equipment to sustain the conflict, Russia's economy has grown rapidly -- by 3.8% in 2024. But the International Monetary Fund on Tuesday said it expects a sharp slowdown to 1.4% this year and 1.2% next, in part because of the high interest rates set by the central bank." [1]
1. World News: Russia Keeps Key Rate at 21%. Hannon, Paul. Wall Street Journal, Eastern edition; New York, N.Y.. 26 Apr 2025: A6
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