The Central Bank of Russia (CBR) on April 29 decided to keep the key interest rate at 11%, unchanged since last August, and continue its moderately tight monetary policy, the regulator said in a press release.

Analysts had been divided on which way the CBR would go prior to the announcement, but in the end it chose inflation targeting over concerns about the pace of the economy's recovery.

The dilemma was whether to ease the main borrowing cost reference to support economic recovery or to keep the rate flat in order to stick to the central bank's policy goal of curbing inflation to 4% by the end of 2017.

The CBR said the decision to keep the rate unchanged was driven by elevated inflationary risks, due to still high inflationary expectations, increased risks from the fiscal side, and "ambiguous" dynamics in nominal wages.

At the same time, despite its hawkish comments prior to the meeting, the CBR somewhat eased its rhetoric, allowing for a "gradual cut in the key interest rate on one of the upcoming meetings", should the inflationary risks recede.

This softened the line after the central bank's earlier pledge "to conduct moderately tight monetary policy for a more prolonged time than previously planned".

The CBR sees the economy as "entering a phase of growth recovery", expecting positive GDP growth already in the second half of 2016 or beginning of 2017, in line with government's expectations.

At the same time, interest rates are expected to decline even without the rate cut, the CBR argues, noting that the upcoming tapping of the Reserve Fund to finance budget deficits will create excess liquidity in the banking sector.

The central bankers have repeatedly pointed in the government's direction, arguing that while the balance of payments and the financial system have successfully adopted to the new low-oil-price environment, strong fiscal misbalances have yet to be solved.

While some analysts saw the recent upwards revision of wage data in the first quarter as a sign supporting recovery to come in 2016, the CBR sees "ambiguous nominal wage dynamics" as an additional inflationary factor.