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UPDATE 2-Russia keeps rates at record low, puts more cuts in question

* Bank of Russia keeps key rate at 4.25%

* Decision in line with expectations

* Central bank’s tone turns more hawkish amid higher inflation

* Next rate-setting meeeting is scheduled for Feb. 12 (Adds detail, analyst comments)

MOSCOW, Dec 18 (Reuters) - Russia’s central bank kept its key interest rate at a record low of 4.25% on Friday following a recent jump in inflation and said it would consider whether there was potential for lower rates given that inflationary risks have increased.

The decision to leave the rate unchanged was in line with a Reuters poll that forecast Russia would keep the cost of lending at its current level due to a rise in consumer prices after a slide in the rouble.

“Our view on the balance of proinflationary and disinflationary risks has changed slightly. We don’t see the predominance of disinflationary risks that we saw previously,” Governor Elvira Nabiullina said, explaining the rate decision.

The central bank cut rates early this year when the economy took a hit from a plunge in prices for oil, Russia’s main export. Fallout from the coronavirus pandemic and lockdowns that hurt business activity have also buffeted the economy.

Lower rates support the economy through cheaper lending but can also increase inflation, the central bank’s main remit, and make the rouble more vulnerable to external shocks.

“When taking a decision on the key rate in the future, we have to additionally assess how the situation will develop and also whether there is still room left for lowering the rate,” said Nabiullina. “It is difficult to give an assertive answer to this question now.”

Annual inflation stood at 4.7% as of Dec. 14 and will accelerate to 5% in the first quarter of 2021, the central bank said, predicting its return to the 4% target later next year.

“The more hawkish view on inflation fed through into the CBR’s guidance on interest rates... We interpret this as a clear signal that the scope for further monetary easing has been largely exhausted,” Capital Economics said in a note.

Artem Zaigrin, chief economist at Sova Capital, said the central bank could keep the key rate on hold in the first quarter “given the rise in inflationary pressures despite government attempts to stem the growth in food prices”.

Nabiullina predicted that her bank’s monetary policy would remain soft in 2021, saying she did not support administrative measures that Russia has taken to get a grip on food prices. (Additional reporting Gabrielle Tétrault-Farber, Elena Fabrichnaya, Alexander Marrow; Editing by Gareth Jones)

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