MOSCOW: Russia's central bank left its key interest rate on hold at its monthly meeting on Friday, maintaining its campaign against stubbornly high inflation even as the economy suffers its weakest growth in four years.
The bank said on Friday it expects inflation to fall in the first half of 2014 but not to reach its 5 percent target until the second half. Accordingly, it held the benchmark one-week minimum auction repo rate at 5.5 percent, leaving the key policy rate unchanged for the 15th month in a row.
"CBR will be very determined, in our view, to meet its ambitious 2014 inflation objective,'' Ivan Tchakarov, an economist at Citi in Moscow, said in a note. "Hence, there is a risk of a smaller cut than expected by us and the market."
Economists polled by Reuters at the end of November had forecast the central bank would only cut rates by a quarter point in the first quarter and then ease further in the second, as inflation begins to slow. Under the new governor, Elvira Nabiullina, the central bank has made clear that it wants to bring down the inflation expectations of households and businesses before easing policy, despite a weak economy.
"Production activity and investment demand remain subdued, while producer confidence indicators have not been improving," the central bank said in its statement.
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