The Central Bank of Russia (CBR) will keep the key interest rate unchanged at 11%, it said after the board of directors met on January 29. This is the forth consecutive time the CBR has held back monetary easing as plunging oil prices and renewed ruble volatility threaten to undermine inflation targets.

The move was broadly expected: All 42 respondents in a Bloomberg survey expected the key interest rate to be kept at 11%.

As some analysts predicted, the CBR was more hawkish and said in an accompanying statement that "should inflation risks amplify, the Bank of Russia can't rule out a tightening of its monetary policy".

"The deterioration of the global commodity market will require a further adjustment of Russian economy," the CBR said, seeing "a higher risk of accelerated inflation".

The continuation of the monetary easing cycle has been postponed by the regulator since August 2015, after it cut the key interest rate by 6pp from 17% throughout 2015.

Although inflation had been expected to moderate to 10% y/y in January (from 12.9% y/y in 2015 overall), "another round of exchange rate pass-through is set to impact both prices and inflation expectations, which remain anchored to FX moves", VTB Capital said on January 29.

The bank estimates the lag between currency devaluation and the CPI effects at about four weeks and expects January's stable weekly inflation reports to be followed by "a more visible uptick in the inflation run rate" despite weak demand.

Alfa Bank added that while the current stabilisation in monthly price growth "seems positive at a first glance" it does not believe it changes the case for the CBR's rate decision.

Given the downside risks on the commodity market, continuing ruble depreciation now "looks to be a question of time, and thus the pass-through effect on inflation remains a risk for this year's inflation trend", Alfa noted on January 28.

In the current situation, any better than expected inflation figures would reduce the risk of a rate hike rather than offering an opportunity for a cut, the bank's analysts said.