MOSCOW: Russia's central bank left its main interest rate unchanged at 8.25 percent on Friday in a closely-watched decision that followed the appointment of a new governor with close ties to President Vladimir Putin.
The Bank of Russia kept the same rate for the sixth month running despite pressure to act in the face of weakening growth.
The institution had until now fought off such calls by pointing to inflation that has been running above its upper target of six percent, and which reached an annualised 7.3 percent last month.
The bank said in a statement that the cost of living increase "could lead to higher inflation expectations... and is a source of inflationary risk, especially considering plans to increase tariffs" on electricity and gas.
The decision came three days after Putin said he would nominate economic adviser and close ally Elvira Nabiullina to replace the widely-trusted outgoing bank chief Sergei Ignatyev this summer.
Analysts praised Nabiullina as a wise economist who could nevertheless be pressured by Putin. The Kremlin has expressed disappointment at the slow growth and hinted that the rates are too high.
Some analysts said the bank decided not to act now in part because it could not be seen as being swayed by the nomination of Putin's new choice.
"While (Friday's decision) was expected by the market, this was related to the understanding that the Central Bank of Russia would not like to add to excitement that surrounded the nomination of Elvira Nabiullina as the new (bank) governor," said Ivan Tchakarov of the Renaissance Capital investment bank.
But the analyst said that inflation was high due to seasonal factors and the bank would be wise to spur growth soon by bringing down rates.
"The combination of continuously weakening economic activity and supply-driven inflation should indisputably provide the right rationale to cut rates," Tchakarov argued.
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