By Georgi Kantchev

MOSCOW--The Russian central bank kept its key interest rate at a record low as a swift rise in coronavirus cases has clouded the economic outlook and volatility in the Russian ruble has increased ahead of the U.S. election.

The bank on Friday held its benchmark rate at 4.25%, following several cuts earlier this year that drove the rate to a post-Soviet low. It said in a statement that it would consider further cuts at upcoming meetings.

With the virus making a resurgence and cases hitting new records in Russia, analysts say that the outlook for the economy, which has already been badly bruised by earlier coronavirus lockdowns and low oil prices, has deteriorated.

Meanwhile, the Russian ruble has declined in recent months and remains unstable ahead of the Nov. 3 U.S. presidential vote amid investor concern about what its outcome would mean for relations with Moscow and the prospects of new economic sanctions.

"The outlook is uncertain," said Nikolay Markov, a Russia-focused economist at Pictet Asset Management. "It looks like the economic activity might deteriorate because of the second wave. At the same time, the U.S. election matters since depending on who wins, this could have a different impact on Russian assets."

President Trump and Democratic nominee Joe Biden have often sparred over policies on Russia, including in recent debates, when Mr. Biden has accused his opponent of being unwilling to take on Moscow.

Mr. Biden has long maintained a tough stance toward the Russian government and has spoken out against the country's foreign-policy ambitions that often run counter to that of Washington. He was vice president when the U.S. imposed sanctions on Moscow after it annexed the Crimean peninsula from Ukraine in 2014. Washington has since hit Russia with sanctions over the Kremlin's alleged interference in the 2016 U.S. elections, and other actions, which Moscow has denied.

President Trump has fueled concerns about his administration's Russia policy by casting doubt over U.S. intelligence charges that the Kremlin interfered in the U.S. presidential election. His administration, however, has imposed sanctions on Moscow, closed Russian consulates and expelled Russian diplomats while also engaging with the Kremlin on arms control.

The Russian economy has been pummeled by the coronavirus pandemic, with the country recording the fourth-highest number of reported Covid-19 infections tally in the world at close to 1.5 million cases. A tumble in oil prices this year also hit industrial production and budget revenues, a third of which Russia derives from oil-and-gas sales. As a result, the International Monetary Fund expects Russia's gross domestic product to fall by 4.1% this year.

Russian President Vladimir Putin has ruled out a second lockdown and Russian officials say the health system is better prepared to cope than in the spring. Still, authorities in Moscow and other cities have increased controls over mask wearing in public transport and shops, ordered companies to have more employees working from home and temporarily closed schools. A renewed global economic slowdown due to rising virus cases world-wide is also expected to hit demand for oil, heaping more pressure on the Russian economy.

Economic indicators had improved over the summer as the country emerged from the spring lockdown. Consumer spending has begun to decline in recent weeks, with a spending index compiled by Sberbank, Russia's largest lender, down 2.8% on an annual basis as of last week. Russian manufacturing activity, meanwhile, contracted in September after growing in August, hit by a fall in new orders due to weak demand, according to data provider IHS Markit.

"Flash indicators of economic activity point to a slowdown in the recovery growth of the Russian economy," the central bank said in a statement Friday. "The worsening epidemiological situation negatively influences the sentiment of households and businesses, potentially affecting both demand and supply."

While a deterioration in the economic activity would usually be a reason for the Russian central bank to cut rates further to stimulate consumption, the ruble's volatility and its impact on inflation is a ground for a pause, analysts say.

Turmoil in neighboring Belarus, the suspected poisoning of Kremlin critic Alexei Navalny and deadly conflict between Armenia and Azerbaijan have all weighed on the currency in recent months. It is down around 12% against the dollar since June, making it one of emerging markets' worst-performing currencies.

Following the central-bank decision Friday, the ruble was 0.3% stronger against the dollar at 76.32. That compares with a rate of 68.23 in June.

But relations with the U.S. ahead of the vote have taken center stage in recent weeks. The ruble briefly fell Thursday after Director of National Intelligence John Ratcliffe said this week that Russia and Iran have taken actions in an attempt to influence public opinion in the coming election, a claim that Moscow denied. Mr. Biden has warned that interfering in the U.S. election would come at a substantial cost.

"[A] reason for the 'wait and see' [central bank] approach in Russia is the political uncertainty around U.S. elections and the consequences for Russia's risk-perception," Dmitry Dolgin, chief economist on Russia at ING bank, wrote in a note to clients.

Write to Georgi Kantchev at Georgi.Kantchev@wsj.com

Corrections & Amplifications

This article was corrected at 1636 GMT to clarify that the article was written by Georgi Kantchev not Ann M. Simmons.

(END) Dow Jones Newswires

10-23-20 0745ET