Russia's central bank left interest rates unchanged on Friday after President Vladimir Putin warned against cutting borrowing costs prematurely.
Last year, Moscow raised its key interest rate to 16% to combat rising inflation as the Russian currency faltered under pressure from Western sanctions.
The central bank said on Friday it was too early to start cutting rates as inflation currently stood at 7.8% a year, above the official target of 4.0%.
“Inflationary pressures are gradually decreasing but remain high,” the report said.
“Inflation will return to target somewhat slower” than expected in February, he continued, adding that higher rates will also be needed for a longer time.
“We do not rule out maintaining the current key rate until the end of the year,” said the head of the Central Bank, Elvira Nabiullina, at a press conference after the decision on the rate.
Speaking to business leaders on Thursday, Putin stressed the need to be “cautious” about when to start cutting rates.
“The threat of inflation, as the heads of the Central Bank say, still hangs over us,” the Kremlin leader said at a business forum.
Russia has defied initial expectations of economic collapse with its military offensive in Ukraine.
Earlier this month, the International Monetary Fund (IMF) raised its forecast for Russia's economic growth in 2024 to 3.2%.
Rising defense spending and redirecting energy exports to countries such as China and India have protected the economy but pushed up domestic prices.
Putin pointed to the example of Turkey, which raised rates to 50% to fight a crippling inflation crisis, as a cautionary tale.
“If we go the other way, we may have a similar situation in some neighboring countries where inflation is double-digit… They have crossed a certain threshold and now cannot cope with it,” he said at the forum.
Nabiullina, a key economic ally of Putin, is credited with keeping the Russian economy on track through emergency rate hikes and capital controls despite an onslaught of Western sanctions.