February 3, 2017 / 10:45 AM / 7 months ago

UPDATE 1-Russia cenbank holds rates, says less room for cuts

MOSCOW, Feb 3 (Reuters) - Russia's central bank kept its key interest rate unchanged on Friday at 10 percent, as expected, and said the room for rate cuts had decreased.

"Given the internal and external developments, the Bank of Russia's capability to cut its key rate in the first half of 2017 has diminished," the central bank said.

The bank said foreign-currency purchases that it will carry out on behalf of the finance ministry starting next week will not bring "considerable inflation risks" thanks to its moderately tight monetary policy.

"Positive real interest rates will be held at the level which will ensure demand for loans without increasing inflationary pressure and uphold incentives for saving," the central bank's statement said.

Risks that annual inflation will fail to slow to its target of 4 percent this year still remain, it said.

The next rate-setting meeting is scheduled for March 24. (Reporting by Andrey Ostroukh and Alexander Winning; Editing by Christian Lowe)

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