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2018.09.1407:00:00UTC+00Russia CB Unexpectedly Raises Key Interest Rate By 25 Bps To 7.5%

Russia central bank unexpectedly raised its key interest rate by a quarter-point on Friday, citing a significant increase in "proinflationary risks" due to highly uncertain external conditions.

The Board of Directors decided to raise the key rate by 0.25 percentage points to 7.50 percent per annum, the Bank of Russia said in a statement. Economists had expected the bank to hold the rate steady.

The central bank forecast annual inflation to be 5-5.5 percent in 2019 and return to 4 percent in 2020.

Growth forecast for this year was left unchanged at 1.5-2 percent. The projections for next year was updated to 1.2-1.7 percent, considering the upcoming VAT increase and a boost in government spending.

The bank expects the suspension of foreign currency purchases in the domestic market to help to curtail the exchange rate volatility and its influence on inflation, over the next few quarters.

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