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Investing.com - Central Bank of Russia (CBR) on Friday maintained its benchmark interest rate at 21.00%, aligning with the predictions of analysts surveyed by LSEG, while resisting pressure from businesses and politicians advocating for lower rates.
According to Capital Economics, the CBR's interest rates are expected to remain unchanged until the latter half of the year, with a more conservative monetary easing than is generally anticipated.
The CBR's decision to pause its rate hikes was foreshadowed by a slightly more dovish tone at its previous meeting. However, inflation remains a significant concern for the bank, which is prepared to increase rates further if necessary.
In its latest medium-term outlook, the CBR adjusted its year-end inflation forecast to 7.0-8.0% year-on-year, up from the prior 4.5-5.0%. Additionally, it revised its average policy rate projection for 2025 to a range of 19.0-22.0%, from the former estimate of 17.0-20.0%.
Capital Economics analysts forecast that Russian inflation will continue to escalate in the coming months, potentially peaking at 10.3% year-on-year in April, as the ongoing conflict exacerbates economic capacity constraints.
Despite recent demands for monetary easing, an interest rate reduction seems improbable until at least the second half of the year. Capital Economics' projection for the policy rate to conclude the year at 18.00% is higher than the consensus estimate of 16.00%.
The discussions between Trump and Putin are not expected to influence the CBR's monetary policy decisions at present. However, a potential cessation of the war could alleviate demand-supply imbalances within Russia's economy, potentially widening the path for future interest rate decreases.
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