Russian central bank keeps policy rate unchanged at 20% as expected

The Bank of Russia announced on Friday that it left the policy rate unchanged at 20% as expected.

Key takeaways from policy statement

"Proinflationary risks have considerably increased and are now prevailing over the entire forecast horizon."

"Over a longer horizon, the Russian economy faces considerable uncertainty."

"Annual inflation will return to 4% in 2024."

"Flash indicators, including the Bank of Russia’s business survey, suggest a deterioration of the situation in the Russian economy."

"GDP will reduce over the coming quarters."

"Monetary policy is set to enable a gradual adaptation of the economy to new conditions and a return of annual inflation to 4% in 2024."

"Will take into account actual and expected inflation movements relative to the target and economic developments over the forecast horizon."

"Will take into account risks posed by domestic and external conditions and the reaction of financial markets."

"Drastic change in external conditions for the Russian economy that occurred at the end of February has created threats to financial stability."

"Capital controls helped support the stable functioning of the Russian financial system."

"Weekly estimates show that inflation has significantly accelerated since early March."

"Economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary but inevitable period of increased inflation."

Market reaction

The USD/RUB  pair edged higher with the initial reaction and was last seen rising 0.65% on a  daily basis at 103.80.