Russia's central bank held key interest rates unchanged on Friday for the seventh month in a row but adopted a more hawkish tone that left open the possibility of policy tightening in the coming months.
Policy makers at their monthly meeting kept the fixed one-day repo rate, a de-facto ceiling for the money market, steady at 6.25 per cent. The overnight deposit rate, a floor for interbank rates, was held at 4 per cent.
The more symbolic refinancing rate, used for overnight loans, was kept at 8 per cent.
In a statement, policy makers described the current level of rates as "acceptable in the near term" - a subtle change in language from previous statements that had described rates as appropriate "for the coming months".
"They now leave open the question about changing policy rates in one or two months," said Alexander Morozov, chief Russia economist at HSBC. "The message is that they may change their policy and hike rates."
Although Russia is grappling with the twin risks of accelerating inflation and weakening economic growth, the central bank presently appears more preoccupied with the former.
Its statement highlighted an acceleration in inflation, which rose to 5 per cent as of July 9 from a post-Soviet low of 3.6 per cent in May, after hikes in household utility bills, delayed from January, kicked in at mid-year.
The rise in inflation had been expected, policy makers said, while uncertainty over this year's harvest represented "a source of additional inflation risks."
The central bank wants to cap year-end inflation this year at below 6 per cent.
The worries about inflation contrasted with bullish remarks about economic growth.
While noting the "global economic uncertainty", the central bank painted a rosy picture of a Russian economy that is so far shrugging off a deteriorating international backdrop.
In contrast with previous months, it made no mention of an economic slowdown, emphasizing robust growth in consumption and investment, rising consumer credit, and recovering industrial production.
Many analysts read the central bank's remarks as a sign that rates are more likely to rise in future than fall.
"Unless something really goes wrong abroad, rates will have to go up rather than down," said Clemens Grafe, chief Russia economist at Goldman Sachs Group Inc.
"The balance of the remarks has moved a tiny bit towards indicating inflationary risks, and the phrase 'for the near future' unties the hands of the central bank towards a tightening of monetary policy - theoretically as soon as the next meeting," said Nikolai Podguzov, analyst at VTB.
Analysts said that if the central bank were to increase rates in the near future, a rise in its 4 per cent deposit rate was the most likely option, while it was still expected to hold off from changing its key lending rates, which would have a more pronounced impact.
The central bank is treading a tightrope that makes a continuing wait-and-see approach likely. Recent surveys point to a significant deterioration in business confidence, which argues against hikes in interest rates.
"The central bank will be as careful as possible," Mr. Podguzov. "We aren't living in a vacuum, and external factors could easily hit our economic growth."
- with files from Maya Dyakina