Posted By Global Banking and Finance Review
Posted on February 26, 2025
MOSCOW (Reuters) - The Russian central bank said on Wednesday that the rouble's rally since the start of the year was linked in part to geopolitical factors, but it was too early to evaluate the impact on the economy.
The Russian currency has gained about 24% against the dollar and 15% against China's yuan this year, mostly on expectations of better relations with the United States.
"The strengthening of the rouble was linked both to the markets' reaction to geopolitical events and to the seasonal decrease in demand for foreign currency from importers," the regulator said.
"It is currently difficult to assess how sustainable the strengthening of the rouble observed in recent weeks will be and how it will affect prices," it said in the published minutes from its rate-setting meeting on February 14.
A stronger rouble would help to bring down the rate of inflation, which has become the main headache for Russian authorities.
The central bank kept its key interest rate on hold at 21% at its last meeting, the highest level since the early 2000s, to fight inflation.
The regulator said that the board had considered hiking the rate further to 22%, given continued inflationary pressures and the overheating of the economy.
It expects the annual inflation rate to climb to 10.6% in the first quarter of 2025, according to the baseline scenario.
Russia's economic growth rate could fall to 2.9% in the first quarter of 2025 compared with 3.3% in the fourth quarter of 2024, it said.
(Reporting by Elena Fabrichnaya, writing by Gleb Bryanski; Editing by Mark Trevelyan and Sharon Singleton)
