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Bank of Russia cuts key rate to 17%
“Today's decision reflects a shift in the balance of risks of accelerated consumer price growth, a slowdown in economic activity and risks to financial stability,” the regulator said in a statement. “The Bank of Russia will make further decisions on the key rate based on an assessment of risks from external and internal conditions, the reaction of financial markets to them, and taking into account the actual and expected inflation dynamics relative to the target, the economic development over the forecast horizon, leaving room for further key rate reduction at its upcoming meetings.”
At the same time, the Central Bank noted that the external conditions remained challenging for the Russian economy and significantly constrained economic activity. Risks to financial stability are still present, but have ceased to grow now, including owing to the capital flow control measures. A steady inflow of funds to fixed-term deposits is in place.
“Annual inflation will continue to rise due to the base effect, but the latest weekly data show a significant slowdown in the current price growth rate, due to the dynamics of the ruble exchange rate, inter alia,” the regulator said. “The tightening of monetary conditions was partly offset by lending support programs initiated by the Government and the Bank of Russia, but it will continue to limit pro-inflationary risks.”
Since February 28, this figure has been at a record level of 20%.