The Bank of Russia has decided to keep its benchmark rate unchanged at a policy meeting, citing higher inflation and slowdown risks on Friday, says a press release on the Central Bank’s website.

      On December 16, 2014, in response to a strong depreciation of the rouble, Russia’s Central Bank raised the key rate dramatically from 10.5 percent to 17 percent in a move to limit access to cheap money that could be used to buy up foreign currency.

      Since then, it has slowly brought the rate down to the current level of 11 percent.

      The initial decision has been criticized by many experts and business leaders, with some saying it would stymie private lending, grinding the economy to a halt. But thanks to a paced increase, the regulator was able to avoid such a scenario.

      The rouble strengthened in the following spring but saw a fast depreciation two months later.

      The decline was partially due to clear signals from the Central Bank that it apparently doesn’t want the national currency to appreciate too much.

      In particular, on May 14, 2015, the Bank of Russia announced it would take advantage of the strengthening rouble to bolster its gold and foreign exchange reserves to a comfortable level of $500bn. At that point, the reserves totaled around $356bn.

      The Bank of Russia rejected allegations that its decision to buy foreign currency contradicts its main mandate to target inflation

      But it also warned that the tough economic times are not yet over, and the banking sector might still be affected by the shocks.

      Article 75 of the Constitution of the Russian Federation establishes a special legal status of the Bank of Russia, gives it the exclusive right to issue currency (Part 1) and protect the ruble and ensure its stability, which is the main function of the Bank of Russia (Part 2). The status, purposes, functions and powers of the Bank of Russia are also spelled out in Federal Law No. 86-FZ, dated July 10, 2002, ‘On the Central Bank of the Russian Federation (Bank of Russia)’, and other federal laws.

      According to Article 3 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, the goals of the Bank of Russia are to protect the ruble and ensure its stability, promote the development and strengthen the Russian banking system, ensure the stability and development of the national payment system, develop the financial market of the Russian Federation and ensure its stability.

      As for the banking system, Russia-IC reported that the government launched a program to bolster the country’s banking sector amid the falling rouble, oil prices and restrictions on capital access imposed by the West over Russia’s alleged role in the Ukraine crisis.