Russia’s central bank left rates unchanged on Friday and announced measures to support the economy and markets after the rouble fell sharply amid mounting economic threats from low oil prices and the coronavirus epidemic.
The central bank held its key interest rate at 6 per cent, halting its monetary easing cycle, as analysts forecast in a Reuters poll.
The rate decision was a difficult call for the bank, which was thought to also be considering raising rates to address the weakening rouble and to curb inflationary risks linked to its depreciation.
Broader risks of a potential global economic slowdown could also have tempted it to slash rates to make lending cheaper, something the U.S. Federal Reserve and the Bank of England, among others, have done recently.
But the central bank said it had decided to hold rates after slashing them six times in a row, because coronavirus-related global market volatility and a sharp drop in oil prices had caused the economic situation to deviate from its forecasts.
“The package of measures adopted by the Government and the Bank of Russia ensures financial stability and will support the economy. All these factors were taken into account when making the key rate decision,” it said.
When the rouble reached four-year lows earlier this month, the central bank started selling foreign currency on the market for the first time since early 2015 and said it was ready to engage other tools to ensure stability.
It announced more measures on Friday designed to support business, consumers and the financial sector.
Russia has so far reported 199 cases of coronavirus and one coronavirus-related death.
The bank’s measures included special refinancing rates, favorable conditions for specific types of loans, and a decision to postpone the introduction of tighter banking regulation.
Central Bank Governor Elvira Nabiullina is expected to shed more light on Russia’s monetary policy and forecasts at an online media conference at 1200 GMT.
The rouble pared gains after the rate decision, sliding to 79.11 vs the dollar, moving away from its weakest level since early 2016 of 81.97, which it touched on Thursday.
Pummeled by a slide in oil prices below $30 per barrel, the rouble has become one of the worst-performing currencies against the dollar this year.
The central bank said the falling rouble posed a significant but short-term upside risk for inflation. The lower exchange rate could prompt inflation to exceed its 4 per cent target this year before returning to it in 2021, it said.