Russia Central Bank Cuts Key Rate Back To 9.50%
10 Juni 2022 - 10:36AM
RTTF2
Russia's central bank decided for another sharp interest rate
reduction on Friday as policymakers shifted its priority to
supporting economic growth after the ruble strength lowered
inflation.
The Board of Directors of Bank of Russia decided to cut the
benchmark rate by 150 basis points to 9.50 percent, taking it back
to the level seen before the war with Ukraine began.
After Russia invaded Ukraine in late February, the central bank
hiked its interest rate sharply to 20.00 percent from 9.50 percent.
Later, the bank slashed the rate by cumulative 1050 basis
points.
The focus of the central bank has shifted very quickly away from
preventing financial stability and inflation risks from taking hold
to supporting the recovery and lending, Liam Peach, an economist at
Capital Economics, said.
Further reductions are likely to be more gradual from here, but
interest rates will fall to 8 percent by year-end, the economist
noted.
The board said its monetary policy stance will retain its
necessary disinflationary impact to bring inflation back to the
target in 2024.
The bank said it will consider the necessity of key rate
reduction at its upcoming meetings.
Given the current monetary policy stance, inflation is set to be
14.0 percent -17.0 percent this year, before declining to 5.0-7.0
percent in 2023 and return to 4.0 percent in 2024.
In May, inflation slowed to 17.1 percent from 17.8 percent in
April, as a result of strength of the ruble.
According to the board, the actual decrease in economic activity
in the second quarter of 2022 is less pronounced than the central
bank assumed in its April baseline scenario.
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