Russia's central bank lifted its key interest rate by 100 basis points to 16% Friday, raising borrowing costs for the fifth consecutive meeting in response to stubborn inflation while indicating that its tightening cycle was now close to completion.

The central bank has raised rates by 850 basis points since July, including an unscheduled emergency hike in August as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy.

The bank said pro-inflationary risks over the medium-term horizon remained substantial and warned that stabilizing inflation near its 4% target would require high rates for a long time. Higher-than-expected government spending would also raise inflation risks, it said.

Friday's decision was in line with a Reuters poll of analysts.

Governor Elvira Nabiullina said the 100-basis-point hike and a rate hold were the only options substantially considered, but there were "isolated proposals" for a sharper increase.

"Based on our baseline scenario ... we are close to the end of the rate hike cycle, but in many ways, everything will depend on the situation," Nabiullina said.

The central bank's tightening cycle began this summer when inflationary pressure from a tight labor market, strong consumer demand and the government's budget deficit was compounded by the falling rouble.

The bank said labor market conditions were the key supply-side constraint on the Russian economy, which it said was still suffering from significant labor shortages, especially in manufacturing.

But economic growth is set to outperform previous forecasts and exceed 3% this year, the bank said, driven by domestic demand propelled by rising lending and wages.

Russia's economic rebound is a welcome boost to President Vladimir Putin as he runs for re-election in March, with numerous economic challenges on his plate. Moscow's success in evading a Western oil price cap makes those challenges more surmountable.

End of the tightening cycle?

Analysts were divided on the bank's future moves.

"We still think more tightening is to come as inflation pressures build further," said Liam Peach, senior emerging markets economist at Capital Economics, who said he expected another hike to 17% next year.

JP Morgan's Anatoliy Shal said this was likely the last step in the tightening cycle, with current policy already sufficiently, if not overly, restrictive. He expected rates to be cut to around 10% by the end of 2024.

Russia had gradually reversed an emergency hike to 20%, which it made in February 2022 after Moscow sent its troops into Ukraine, prompting sweeping Western sanctions. It cut rates to as low as 7.5% earlier this year.

On Thursday, Putin said annual inflation could approach 8% this year, well above the central bank's 4% target. He even issued a rare apology when a pensioner complained about the price of eggs.

The central bank reiterated its expectation that inflation would end the year at the upper end of its 7%-7.5% forecast range.

The first rate-setting meeting of next year is scheduled for Feb. 16, when the bank will update its forecasts.