Russia keeps key rate unchanged

By Daniel J. Graeber

Central Bank of Russia keeps key rate unchanged, citing a slow pace of recovery for 2017 despite a rebound in crude oil prices. NASA Photo by Bill Ingalls/UPI

| License Photo

 

An expectation of slow growth despite better-than-expected recovery on the bank of an oil price rebound in 2016 means stable rates, Russia's Central Bank said.

The board of directors at Russia's Central Bank said Friday they were keeping their key rate unchanged at 10 percent.

The bank said economic recovery in 2016 was better than expected as the price for crude oil held within its baseline assumptions. Crude oil prices fellow below $30 per barrel last year just as the value of the Russian currency faltered.

Central Bank Gov. Elvira Nabiullina said the rate of inflation is expected to be close to its low-end outlook of around 5.5 percent this year and the International Monetary Fund said there are prospects for "modest" recovery starting in 2017.

Sanctions and lower crude oil prices put pressure on the Russian economy last year, though the government expects investments in the oil sector to expand. The White House under President Donald Trump has signaled it could ease some of the sanctions pressures for Russia.

Nevertheless, the Russian bank said that "internal and external developments" diminished its appetite for any rate cuts.

"In order to maintain the propensity to save and anchor sustainable inflation slowdown driven by demand-side restrictions, monetary conditions should remain moderately tight," the bank said.

Russia is party to a multi-lateral agreement led by the Organization of Petroleum Exporting Countries to trim oil production in an effort to stabilize crude oil markets. Russia maintains it's complying with the deal, though production last year was at or near post-Soviet highs.

Russia derives a sizeable portion of its revenue from oil and natural gas and is a main energy supplier to European and Asian economies. The Central Bank said growth in industrial production is ongoing, "and so is expansion of non-oil and gas exports in several categories."