In late November, economists surveyed by Bloomberg said they expected a quarter-point cut in the first three months of the year, according to the median of 20 estimates. They also forecast a quarter-point cut in the second quarter followed by no change through mid-2015. As recently as October, analysts had projected a reduction this year.

The three-month MosPrime rate, which large Moscow banks say they charge one another, may drop 24 basis points, or 0.24 percentage point, in the next three months, according to forward-rate agreements tracked by Bloomberg. That's down from as much as 56 basis points in August.

“Bank Rossii forecasts that inflation will resume the declining trend in the first half of 2014 and reach the target in the second half,” policy makers said in today's statement. “The expected sluggish recovery of external demand and the subdued investment activity will constrain inflation dynamics.”

Consumer prices accelerated more than forecast in November to 6.5 percent, a three-month high. The causes of the acceleration, led by an increase in food and vegetable prices that was “unusual for this season,” should have a short-term effect, according to the statement.

Inflation Expectations

The central bank has kept its main rates on hold since September 2012, when they were raised a quarter point. Household expectations for inflation remain “very high,” central bank First Deputy Chairman Ksenia Yudaeva told lawmakers Nov. 14.

The central bank is seeking to keep consumer price growth to about 5 percent next year as it prepares for a shift to inflation targeting in 2015. The target rate will drop by a half point in each of the following two years, according to the regulator's three-year monetary policy plan.

“The latest rise in Russian inflation, coupled with mounting concerns over the rapid expansion of consumer credit, mean that even the modest cuts in interest rates that we had penciled in for early 2014 now look unlikely,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd. in London, said in an e-mailed note. “We've tweaked our forecast and now expect rates to remain unchanged throughout next year.”

'Below Potential'

Last week, the Economy Ministry cut its growth forecast to 1.4 percent in 2013 and 2.5 percent in 2014. The economy is growing at “slightly below its potential,” the central bank said.

With the economy growing near potential, policy makers should lean toward tighter monetary policy to slow inflation, the International Monetary Fund said in a Dec. 10 statement following a mission to Moscow. The Washington-based lender reduced its forecast for 2014 growth to 2 percent from 3 percent.

The central bank doesn't have much room to cut rates, though it may attempt to ease borrowing costs by providing greater credit to commercial lenders, said Economy Minister Alexei Ulyukayev, who moved to the post in June after serving at the central bank as a first deputy chairman.

“Even though the situation with inflation is mainly related to supply shocks and not monetary policy, it doesn't give much room to maneuver,” he told reporters Dec. 11 in London. Next year's target of 5 percent inflation is “quite realistic” and will be helped by a freeze in prices charged by state-run monopolies, he said.

The regulator scheduled the next policy decision for Feb. 14, skipping a rates meeting in January. The first week of the year is a holiday period.

Russia won't cut its main interest rate until the second quarter “at the earliest,” according to Vladimir Miklashevsky, a trading desk strategist at Danske Bank A/S in Helsinki. The central bank may cut the rate by a total of half a point next year, moving “very cautiously,” he said.

“Bank Rossii will continue its expansionary policy, avoiding rate cuts as those are 'more visible' for market participants,” he said by e-mail. “Bank Rossii's strategy is not to cut the price but increase the supply of money, which in the longer run would keep interbank rates at moderate levels.”

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