Russia keeps key interest rate unchanged at 7.5%

Bloomberg

Russia’s central bank kept borrowing costs unchanged, pausing despite persistent inflation risks after a surprise hike last month.
The key interest rate will stay at 7.5 percent, according to a statement. The decision was forecast by 39 of 41 economists surveyed by Bloomberg, with the rest predicting an increase to 7.75 percent.
“Holding the rate unchanged is a good and balanced option,” Irina Lebedeva, a fixed-income analyst in UralSib Bank in Moscow, said before the announcement. “Inflation is in line with the central bank’s forecast, foreign-exchange risks have declined, the perceived threat of sanctions isn’t as acute as it was, and the
overall situation on emerging markets is stabilising.”
A tide of monetary tightening across emerging markets has slowed this month as policy makers from Indonesia to Turkey took advantage of the respite in volatility. Governor Elvira Nabiullina is following suit after shocking the market in September with Russia’s first rate increase since 2014 to restrain inflationary risks stemming both from domestic policy and fear of further US penalties.
The tightening, together with the decision to extend a pause in buying foreign currency until the end of the year, helped the ruble to recoup some losses. The Russian currency has strengthened almost 4 percent against the dollar since the meeting on September 14.
Annual consumer-price gro-wth accelerated to 3.4 percent last month, in line with the Bank of Russia’s estimates, according to First Deputy Governor Ksenia Yudaeva. Policy makers say inflation may exceed their target of 4 percent already by the end of this year and peak at 6 percent in the first half of 2019 due to a value-added tax increase and currency weakness earlier this year.
The ruble’s depreciation has already fuelled inflation expectations, which the central bank watches closely in its rate decisions, to 10.1 percent in September, the highest level since July 2017.