March 21, 2022: On Friday, the Central Bank of Russia held its monetary policy steady. It maintained its key interest rate at 20%, but warning of considerable uncertainty as the economy undergoes a “large-scale structural transformation.”

Shortly after Russian forces invaded Ukraine in late February, the CBR more than doubled the country’s key interest rate from 9.5% to 20% to prop up its plunging currency and mitigate the impact of tough international sanctions.

On Friday, in its statement, the CBR said the sharp increase in its key rate had “helped sustain financial stability.”

“The Russian economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary but inevitable period of increased inflation, related to adjustments of relative prices across a wide range of goods and services,” it said.

“The Bank of Russia’s monetary policy is set to enable a gradual adaptation of the economy to recent conditions and a return of annual inflation to 4% in 2024.”

The ruble sank to record lows against the dollar on the back of a barrage of the recent sanctions and penalties imposed on Moscow by the U.S. and European allies before moderating in the latest weeks. The currency sat at just over 104 to the dollar following the decision on Friday.

Reuters reported that Russia managed to stave off a historic debt default this week by completing some of its sovereign bond payments in dollars. On Friday, the Russian finance ministry said that it had met its obligations to pay coupons on dollar-denominated Eurobonds in full.

The CBR’s quantities of foreign currency reserves were targeted by western sanctions that aim to render them almost inaccessible, preventing policymakers from mitigating the depreciation in domestic assets.