- Russia"s central bank is unlikely to raise its key interest rate by more than 100 basis points in December even after inflation neared a six-year peak in November, Governor Elvira Nabiullina said on Thursday. She told the Reuters Next conference that challenges facing the economy are less dramatic than in 2014, when the Bank of Russia hiked by a huge 650 basis points at the height of the crisis over Russia"s annexation of Crimea from Ukraine. "In the baseline scenario, we estimate the highest increase in the key rate as 100 (basis points)," Nabiullina said in an interview. Analysts polled by Reuters in late November on average expected the central bank to raise the rate (RUCBIR=ECI) by 50 basis points on Dec. 17, to 8% from 7.5%, in what would be its seventh hike this year. read more But Nabiullina said it would be a harmful policy mistake to underestimate inflation risks, including any that might stem from the new Omicron variant of the coronavirus. "We see from the experience of the second half of 2020 that the new waves of pandemic may be more pro-inflationary than disinflationary," Nabiullina said. "There is a lot of uncertainty about this new strain and what reaction it will require from the governments, authorities around the world. It is too preliminary to assess the exact impact on the economy and inflation." She did not expect the key rate to reach double-digit levels as it did in late 2014, when the bank hiked from 10.5% to 17% as the rouble fell to record lows and inflation accelerated after the West slapped sanctions on Russia over its actions in Crimea. "The current situation is of course much less dramatic than the one we had then. Still, we are very concerned with the level of inflation and inflation expectations in Russia," Nabiullina said. Nabiullina said inflation was expected to slow towards the bank"s 4% target in 2022, which would open the door for lowering the key rate in 2023 to a neutral range which the central bank has said it sees at 5-6%. She said the Bank of Russia was prepared for the U.S. Federal Reserve to start tightening policy. "We have been expecting this shift and I think everybody expects that the Fed will tighten monetary policy. "The question is when, how fast? Nowadays, tightening is quite well communicated ... we know that this tightening will happen and we calibrate our monetary policy taking into account these movements," Nabiullina said. To watch the Reuters  Next conference please register here https://reutersevents.com/events/next/