Russia's central bank held its key interest rate at 16% for the third meeting running on Friday, but raised its inflation forecast for 2024, acknowledging for the first time that it may struggle to reach its 4% target this year.

The decision was in line with a Reuters poll of economists, which had forecast that the persistence of inflation, fanned by strong consumer demand and widespread labour shortages, would prevent the central bank from easing borrowing costs more quickly.

The bank lifted its inflation forecast to 4.3-4.8% from 4-4.5% previously.

"Due to the remaining elevated domestic demand, which outstrips the capabilities to expand supply, inflation will return to the target somewhat more slowly than the Bank of Russia forecast in February," the bank said in a statement.

The Bank of Russia had raised rates by 850 basis points in the second half of 2023, including an unscheduled emergency hike in August as the rouble tumbled past 100 to the dollar and the Kremlin called for tighter monetary policy.

Inflation, the bank's main area of concern, stood at 7.4% in 2023, compared with 11.9% in 2022. Economists expect it to remain well above the central bank's 4% target this year. (Reporting by Reuters; Writing by Alexander Marrow; Editing by Mark Trevelyan)