MOSCOW, Feb 16 (Reuters) - Russia's central bank held its key interest rate at 16% on Friday, opting to leave borrowing costs unchanged after five successive rate hikes since last summer, still grappling with stubborn inflation pressure.
"The return of inflation to target in 2024 and its further stabilisation close to 4% assume that tight monetary conditions will be maintained in the economy for a long period," the bank said in a statement.
The bank said inflationary pressures had eased compared to the autumn months, but remained high, while domestic demand was still outstripping production capacity, with labour shortages still the key constraint on expanding the output of goods and services.
The central bank had raised rates by 850 basis points since July, including an unscheduled emergency hike in August as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy, but has lately signalled a more dovish approach.
Friday's decision was in line with a Reuters poll of analysts, who expect interest rates to start coming down this year. Double-digit rates are expected to remain into 2025.
Governor Elvira Nabiullina will address the media at 1200 GMT. The bank's next rate-setting meeting is scheduled for March 22.
The bank raised its forecast for its average key rate range to 13.5-15.5% from 12.5-14.5%, suggesting that easing borrowing costs will take longer than previously thought.
The bank slightly improved its 2024 economic growth forecast to 1.0-2.0%, from 0.5-1.5%. The International Monetary Fund expects Russia's economy to grow 2.6% this year, but anticipates tough times ahead.
Russia's economy rebounded sharply from a slump in 2022, but the growth relies heavily on state-funded arms and ammunition production and masks problems that are hampering an improvement in Russians' living standards.
The central bank's tightening cycle began last summer when inflationary pressure from a tight labour market, strong consumer demand and the government's budget deficit was compounded by the falling rouble.
Russia had gradually reversed an emergency hike to 20% which it made in February 2022 after Moscow sent its army into Ukraine, prompting sweeping Western sanctions. It cut rates to as low as 7.5% in 2023.
Reporting by Reuters; Writing by Alexander Marrow; editing by Guy Faulconbridge
Source: Reuters