Russia's Central Bank has kept its key interest rate on hold at 21%, in a major snub to Vladimir Putin. Bank officials are facing a huge struggle to bring down inflation, which in March stood at 10.3%.

Russia's President had previously urged the Central Bank's governor, Elvira Nabiullina, not to “cryogenically freeze” the economy and to loosen its monetary policy. However, the governor and her deputy Alexei Zabotkin showed no sign of paying heed to Putin's pleas.

At a press conference last week, Nabiullina said: "We had a broad consensus to keep the rate on hold.

"And what we are saying is that it will be necessary to maintain tight monetary conditions for an extended period of time."

The current rate is at its highest level in 20 years and is imposing immense financial strains on companies across the country.

Sergey Chemezov, the head of Russia's defence conglomerate Rostec and a former KGB colleague of Putin, warned last autumn that many companies could go bust.

"If we enter into contracts for products whose production cycle is more than a year, then, naturally, the maximum we receive is an advance payment of 30–40%," he told the RBK publication.

"The remaining funds in order to produce these products must be borrowed.

"And at such an interest rate, all the profit that we provide is all eaten up by the interest that we are forced to pay to the bank.

"If we continue to work like this, then most of our enterprises will go bankrupt."

Interest rates were only at 7% in April 2022, and were forecast to stay at that level for the foreseeable future.

This encouraged many firms to take out variable loans to fund expansion programmes and asset acquisitions.

Bankruptcies are reported to be 20 percent higher in 2024 than they were in 2023, with many more closures expected to come in the near future.

Russia’s biggest steel manufacturer, Magnitogorsk Iron and Steel Works, has enough reserves only for another six months and has reported a "very negative" outlook for 2025.