At the beginning of April, Bank Rossii lowered its key interest rate to 17 percent.
(Photo: imago images/ITAR-TASS)
Moscow The Russian central bank has eased its monetary policy again despite the ongoing sanctions against the country. The central bank announced on Friday in Moscow that the key interest rate would be reduced by 1.5 percentage points to 9.5 percent. On average, economists had expected a somewhat less significant interest rate cut to 10.0 percent. It is the fourth rate cut in a row. The central bank announced further cuts this year.
The justification for the step by the central bank states that the “external environment for the Russian economy remains challenging and is significantly restricting economic activities”. At the same time, inflation is falling faster than expected in April, while the decline in economic activity is less than anticipated.
The central bank is optimistic about inflation. According to their forecast, annual inflation “given the current monetary policy stance” will be between 14 and 17 percent in 2022, then drop to five to seven percent in 2023 and back to four percent in 2024 – the inflation target of the Russian central bank. However, despite a decline, the annual inflation rate was still 17.1 percent in May.
In addition, the central bank announced that it would examine the “need for a rate cut” at its upcoming meetings. The central bank plans to hold its next rate review meeting on July 22.
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At the end of February, the central bank had raised the key interest rate drastically by 10.5 points to 20 percent. In doing so, she was reacting to the sanctions imposed by the West after the start of the war against Ukraine. With its interest rate hike, the central bank wanted to counteract the devaluation of the ruble and the risk of inflation. The ruble has recently recovered significantly. It is now even above the level before the start of the war.
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