The Central Bank of Russia has decided to keep its policy rate unchanged at 21 percent, in line with expectations. The bank announced its decision on interest rates, highlighting the continued high levels of inflationary pressure. The statement pointed out that the growth in domestic demand has significantly outpaced the expansion in goods and services supply, while also noting a more pronounced cooling in credit activities. It was mentioned that the tight monetary policy and cooling in lending activities are expected to help achieve the inflation target by 2026. The statement emphasized the need for continued tight monetary policy in light of recent developments, stating that “the Central Bank of Russia has decided to keep the policy interest rate at 21 percent.” Analysts had also expected the Central Bank of Russia to keep the policy rate unchanged. INFLATION REMAINS UNCONTAINED The Central Bank of Russia had raised its policy rate to a record high of 20 percent immediately after the start of the Russia-Ukraine war. The policy rate was held at 16 percent from the end of 2023 until the end of July 2024, and then there were four consecutive rate hikes in 2024. The bank last increased the policy rate by 200 basis points to 21 percent on October 25, 2024. With annual inflation in the country at around 10 percent, the bank aims to reduce this figure to 4 percent. Experts believe that the Russian government’s spending due to the war has negatively impacted inflation in the country.