Russia’s Central Bank has kept its policy rate unchanged at 21% as expected. Despite a recent decrease in inflationary pressures, the Central Bank noted that they continued to remain high. The statement highlighted that the growth in domestic demand significantly outpaced the expansion in goods and services supply, pointing out a noticeable cooling in credit activities while consumer spending remained high. It indicated that the tight monetary policy and cooling in lending activities are expected to enable reaching the inflation target by 2026. The statement emphasized the need for the continuation of a tight monetary policy based on current developments and announced the decision to keep the policy rate at 21%. It also underscored that in case inflationary pressures do not ease, the possibility of increasing the policy rate would be considered in future meetings. Analysts had anticipated Russia’s Central Bank to maintain its policy rate. INFLATION REMAINS UNCHECKED Russia’s Central Bank had raised its policy rate to a record high of 20% immediately after the start of the Russia-Ukraine war. The policy rate was held at 16% from the end of 2023 until the end of July 2024, followed by four consecutive rate hikes in 2024. The Bank last increased the policy rate by 200 basis points to 21% on October 25, 2024. With annual inflation in the country at around 10%, the Bank aims to reduce this rate to 4%. Experts believe that the Russian government’s war-related expenditures have adversely affected inflation in the country.