MOSCOW, Russia: Russia’s central bank cut its key interest rate by 300 basis points for the third time since its emergency rise in late February, citing lower inflation and a recovery in the ruble.
KIRILL Kudryavtsev | AFP | Getty Images
Russia’s central bank cut its key interest rate from 14% to 11% on Thursday, citing a slowdown in inflation and a recovery in the ruble.
Following an emergency meeting, policymakers opted for another cut of 300 basis points, the Bank’s third, following an extraordinary increase in the key interest rate from 9.5% to 20% immediately after the Russian invasion of Ukraine and the imposition of sanctions by the western powers. At the time, the CBR also imposed strict capital controls in an effort to mitigate the impact of sanctions and support the ruble.
“Recent weekly data point to a significant slowdown in current price growth. Inflationary pressures are easing due to the dynamics of the ruble exchange rate as well as the sharp decline in household and business inflation expectations,” the CBR said in a statement. Thursday.
“Annual inflation reached 17.8% in April, however, according to the May 20 estimate, it slowed to 17.5%, declining faster than the Bank of Russia forecast in April.”
Sinking at a record low of $ 150 against the US dollar on March 7, weeks after Russian troops began their unprecedented invasion of Ukraine, CBR capital controls lifted the currency to a two-year high of just over 53. rubles to the dollar on Tuesday.
The CBR said on Thursday that funds continued to flow into fixed-term ruble deposits, while lending remained weak, reducing inflationary risks.
“External conditions for the Russian economy remain challenging, significantly reducing economic activity. Risks to financial stability have been somewhat reduced, allowing some capital controls to be eased,” the CBR added.
The central bank said future interest rate decisions would adjust the real and expected inflation momentum in line with its goal and efforts to transform the Russian economy in the long run, having previously warned that the economy needed to undergo a “structural transformation”. large-scale “to mitigate. the impact of sanctions.
He suggested that there could be further interest rate cuts in forthcoming meetings, the next of which will take place on 10 June.
“According to the Bank of Russia forecast, given the direction of monetary policy, annual inflation will fall to 5.0-7.0% in 2023 and return to 4% in 2024,” the CBR added.