April 19, 2018 / 11:49 AM / 4 months ago

REFILE-Russia c.bank says geopolitics limits room for rate cut

(Refiles with new USN, no changes to text)

MOSCOW, April 19 (Reuters) - The Bank of Russia could keep its key rate higher than previously thought if Russia’s increased risk premium remains in the long term, analysts at the central bank said on Thursday.

“The Russian risk premium increased in the last month by almost 50 basis points. If this change proves to be persistent, the key rate level envisaged by a neutral monetary policy will be higher,” the central bank’s analysts said in a monthly report on economic trends.

The central bank has previously said it plans to lower its key rate to a “neutral” range of between 6-7 percent this year, down from a current level of 7.25 percent.

The analysts said inflationary risks had increased in April, in part because of geopolitical tensions and a sharp weakening of the rouble, but inflation was only seen rising towards the central bank’s target of 4 percent in the second half of the year. (Reporting by Jack Stubbs, Polina Nikolskaya and Elena Fabrichnaya; Editing by Andrey Ostroukh)

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