The Central Bank of the Russian Federation held its key rate steady at 7.75% but said a rate cut is possible later in the year if inflation declines in line with its new expectations.

The central bank lowered its end-of-year annual inflation forecast for 2019 to a range of 4.7% to 5.2%, from 5.0% to 5.5% previously.

"Should the situation unfold according to our baseline forecast, we hold open the prospect of a key rate reduction somewhat sooner than we assumed back in December last year," Central Bank Governor Elvira Nabiullina said. "We do not rule out that this may occur in 2019."

Annual inflation is expected to come in at 4% starting in 2020, Nabiullina added.

"We have every reason to believe that the decisions to raise the key rate made last year are most likely to be sufficient to bring annual inflation back to the near 4% target in the first half of 2020," she said.

In announcing its latest monetary policy decision, the central bank also maintained its GDP growth forecast for 2019 at 1.2% to 1.7%.

Economic growth is expected to pick up to a range of 1.8% to 2.3% in 2020 and between 2% and 3% in 2021 as national projects are implemented.

The central bank also cited risks stemming from a potential slowdown in global economic growth and geopolitical tensions that may raise volatility in commodity and financial markets.