18 Dec 2020 14:15

CBR keeps key rate at 4.25%, noting intensification of proinflationary risks

MOSCOW. Dec 18 (Interfax) - The board of directors of the Central Bank of Russia has kept the key rate at 4.25% per annum, noting reduction of disinflationary risks and intensification of proinflationary ones.

The CBR said in a statement following the board meeting that one-off proinflationary factors "are exerting more significant and prolonged upward influence on prices amid the growth in households' and businesses' inflation expectations and supply-side restrictions."

The Bank of Russia expects inflation at the level of 4.6-4.9% in 2020 against the earlier forecast 3.9-4.2%. It kept the forecast for inflation in 2021 at the level of 3.5-4.0%.

"Disinflationary risks do not prevail in 2021 as much as before, considering the strengthening of short-term proinflationary factors and risks of their influence being more prolonged," the statement said.

It said that "the worsening epidemic situation in Russia and worldwide is constraining economic activity significantly less than in Q2 2020."

Reduction of Russian GDP could be around 4% in 2020 against the CBR's October forecast of 4-5%. "In spring 2021, the Russian economy is expected to resume its sustainable growth as the coronavirus situation returns to normal," the statement said.

It drew attention to the improved situation on external financial and commodity markets amid expectations for quicker global economic recovery on the back of progress in development of a coronavirus vaccine.

The Bank of Russia tightened its signal regarding the future direction of the monetary policy, noting "the high heterogeneity of current economic and price movement trends." The regulator will assess further development of the situation and the existence of potential for additional key rate reduction, it said.