MOSCOW/LONDON (June 7): Russia's central bank held rates at 16% for the fourth meeting running on Friday, but gave its most hawkish signal yet that a hike may be coming in July, and said tight monetary conditions would be required for longer than previously thought.

The decision was in line with a Reuters poll of economists, which had forecast a hold, even as an inflation slowdown has stalled. A quarter of analysts polled had expected rates to be hiked to 17%.

"The Bank of Russia holds open the prospect of increasing the key rate at its upcoming meeting," the bank said in a statement.

"Furthermore, returning inflation to the target will require a significantly longer period of maintaining tight monetary conditions in the economy than was forecast in April."

Governor Elvira Nabiullina was due to address the media at 1400 GMT, slightly later than usual, so as to avoid clashing with President Vladimir Putin, who was scheduled to speak at Russia's premier investment forum in St Petersburg.

Friday's rate decision was the first this year to generate real suspense, with top bankers weighing in beforehand with different forecasts, and analysts unsure as to whether the central bank would raise rates now or at its next meeting on July 26.

The bank said inflation risks had become even more pro-inflationary in the medium-term, exacerbated by changes in terms of trade, persistently high inflation expectations and an upward deviation of the Russian economy from a path of balanced growth.

The central bank's message and forward guidance was hawkish, said Liam Peach, senior emerging markets economist at Capital Economics, positing that the bank's year-end inflation forecast of 4.3%-4.8% may be revised higher before long.

"At the very least, it's looking likely that no interest rate cuts will be delivered by year-end," Peach said.

The central bank said the government's new tax hikes, combined with rising budget expenditures, would likely have a neutral impact on inflation, but it took aim at subsidised mortgage programmes.

"Maintaining large-scale government subsidised programmes may slow the return to more moderate lending growth rates," the bank said.

The Bank of Russia raised rates by 850 basis points in the second half of 2023, including an unscheduled emergency hike in August, as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy.

Inflation, the bank's main area of concern, stood at 7.4% in 2023, compared with 11.9% in 2022. It is currently running at 8.17% and economists expect it to remain well above the central bank's 4% target this year.