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Russian Central Bank sees little risk from oil price volatility

The bank left its policy rate unchanged Friday, days after the U.S. Treasury eased sanctions pressures on Russia.

By Daniel J. Graeber
The Central Bank of Russia said Friday it's keeping its key policy rate unchanged, with inflation expected to stay within its target range. File Photo by DyMax/Shutterstock/UPI
The Central Bank of Russia said Friday it's keeping its key policy rate unchanged, with inflation expected to stay within its target range. File Photo by DyMax/Shutterstock/UPI

April 27 (UPI) -- In a decision Friday to keep its key rate static, the Central Bank of Russia said it was unwavering on its estimate of risk outlook tied to oil price volatility.

The bank kept its key rate stable at 7.25 percent annually. The inflation outlook is low, but the value of the national currency was under pressure from geopolitical tensions.

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Inflation is forecast to run between 3 and 4 percent for the year and consumer prices are on par with those in advanced economies, but the bank said it recognized there may be some underlying risk.

Western-backed sanctions target Russian energy companies, creating pressure on some of the largest sources of revenue for the government. Russia, however, is party to an effort steered by the Organization of Petroleum Exporting Countries to curb supplies and that effort is credited with higher oil prices.

RELATED Russia sees no energy headwinds from sanctions

"The Bank of Russia leaves unchanged its estimates of risks associated with consumer and oil price volatility, wage movements and possible changes in consumer behavior," it said of its rate decision.

Crude oil prices have been supported elsewhere by geopolitical risks, ranging from the multilateral involvement in Syria's civil war, Middle East tensions and a pending U.S. decision the Iranian nuclear deal.

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OPEC economists said they expect Russian manufacturing and service sectors to slow down, but that could be offset by growth in household consumption. Fourth quarter gross domestic product increased 0.9 percent in Russia, following two quarters of 2 percent growth. Full-year GDP growth is forecast at 1.8 percent, compared to 2.7 percent growth expected in the United States this year.

RELATED Russia mulls fate of OPEC-led balancing act

The U.S. Treasury Department this week opened a safety valve by offering some sanctions relief to Russian aluminum producer United Co. RUSAL, the second-largest company of its kind outside of China.

The sanctions relief put the aluminum market in a nose-dive as the risk premium faded, causing ripple effects throughout broader commodities. The price for Brent crude oil was down almost 1 percent following Monday's announcement from the Treasury, but recovered some ground later in the session.

RELATED Russian effort to comply with OPEC balancing effort based on market, not price

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