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Russian central bank leaves rates unchanged but signals a cut for early 2017

Russia's Central Bank
Andrey Rudakov | Bloomberg | Getty Images

The Russian central bank announced Friday that it was keeping its key interest rate at 10 percent, but opened the door to a cut in the first half of 2017.

The Bank of Russia said consumer price growth is slowing down due to temporary factors and that the pace of inflation reduction continues to be "unstable".

"Given this decision and considering that the moderately tight monetary policy is maintained, inflation will slow to the 4 percent target in late 2017. As the trend towards a sustainable decline in consumer price growth takes root, the Bank of Russia will consider an opportunity of cutting the key rate in the first half of 2017," the central bank said in a statement.

The bank acknowledged that the Russian economy, which has been affected by international sanctions and lower oil prices, is recovering at a "heterogeneous" pace. It forecast 1 percent GDP (gross domestic product) growth in 2017 which would rise to 1.5 percent and 2 percent in 2018 and 2019, respectively.

EU sanctions continue

The European Union decided on Thursday to extend economic sanctions against Russia for another six months.

Two core countries - Germany and France – have complained that the agreement between the EU and Russia to decrease its presence in Ukraine, known as the Minsk agreement, has not been fully implemented yet.

The Bank of Russia's board of directors will hold the next rate review on February 3, 2017.

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