By Elena Fabrichnaya and Gleb Bryanski
MOSCOW- The Russian central bank kept its key interest rate on hold at 21 percent, its highest level in more than 20 years, despite President Vladimir Putin’s request not to chill the economy and loud complaints from business leaders.
The central bank raised its interest rate to 21 percent last October, its highest level since the early 2000s, in an effort to contain inflation, Russia’s main economic challenge. In a statement on Friday the regulator said pressures persisted.
“Current inflationary pressures have decreased but remain high, especially underlying ones,” the central bank said.
It added that its tight monetary policy could return inflation to its 4 percent target in 2026, but did not rule out considering another hike if the dynamics did not ensure that goal was reached.
The central bank stunned analysts last December when it unexpectedly kept the key interest rate on hold instead of an expected hike, following Putin’s call for a “balanced” decision, which was made one day before the board meeting.
Putin on Tuesday urged his economic officials not to freeze the Russian economy as if it were in a “cryotherapy chamber” with its tight monetary policy.
Some analysts said that heeding Putin’s advice on Friday could have made the regulator look weak and raised questions about its independence even if there were some grounds for a rate cut.
“Imagine if the regulator decides to lower the rate for well-founded reasons, it might still encounter criticism. People might say, ‘No-one expected a decrease, but the president had mentioned it beforehand’,” said Dmitry Polevoy of Astra Asset Management.
