MOSCOW (Reuters) -Russia’s central bank held its key interest rate at 7.5% at its final meeting of the year on Friday, pointing to moderate consumer price growth and subdued consumer demand, amid rising inflation pressure from the labour market.
The bank’s rate-cutting spree ended in September, after the gradual reversal of an emergency rate hike to 20% in late February that followed Russia’s decision to send tens of thousands of troops into Ukraine and the imposition of wide-ranging Western sanctions in response.
The Bank of Russia has made six rate cuts since February, but has now held rates at 7.5% at its last two meetings. In October it warned that Russia’s partial military mobilisation, ordered by President Vladimir Putin in September, could stoke longer-term inflation due to a shrinking labour force.
Friday’s rate hold was in line with a consensus forecast of analysts polled by Reuters earlier this week.
“Current consumer prices are growing at a moderate rate, and consumer demand is subdued,” the bank said in a statement. “Pro-inflation risks are up and prevail over disinflationary risks.”
Inflation, which the central bank targets at 4%, stood at 12.65% as of Dec. 12, according to the economy ministry. The central bank’s year-end inflation forecast is 12-13%.
The central bank is caught in a bind between high inflation, which dents living standards, and an economy in need of stimulation via cheaper credit to address the negative effects of sweeping Western sanctions imposed in response to Russia’s intervention in Ukraine.
Russia’s economy, saddled with subdued consumer demand, falling disposable incomes and labour shortages, is on shaky ground, with mobilisation set to be a significant drag in 2023.
Central Bank Governor Elvira Nabiullina will shed more light on the bank’s forecasts and policy in a media briefing at 1200 GMT.
The first rate-setting meeting of 2023 is scheduled for Feb. 10.
(Reporting by Alexander Marrow; Editing by Mark Trevelyan)
