Bank of Russia lowers key interest rate by 25 bps to 7.25 pct

The Bank of Russia cut the key interest rate by 25 basis points to 7.25 percent today. In its statement, the central bank noted that the deceleration in inflation is continuing. Meanwhile, inflation expectations continue to be elevated. The Russian economic growth rate is below the central bank’s expectations.

Soft economic activity, along with temporary factors, restrict inflation risks in the short-term horizon. The Bank of Russia, taking into account the pursued monetary policy, expects that the annual inflation might return to 4 percent in early 2020.

The Bank of Russia stated that if the situation develops in line with the baseline forecast, there is likelihood of further reduction of the interest rate at one of the upcoming Board of Director’s meeting and a transition to neutral monetary policy in the first half of 2020.

During its rate decision-making, the central bank has stated that it will take into account the actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets.