Russia Central Bank Lowers Rate Again; Signals More Easing

Russia central bank on Friday cut its key interest rate for the fourth straight session amid persistently slowing inflation and subdued growth and signaled that it is will consider further easing in future. The Board of Directors, led by Governor Elvira Nabiullina, decided to cut the key rate by 50 basis points to 6.5 percent, the Bank of Russia said in a statement. Economists had forecast a reduction to 6.75 percent.

The previous reduction in the rate was a 25 basis points cut in September.

Inflation expectations continue to decrease and economic growth rate still remains subdued, the bank said. The slowdown in inflation is over shooting the forecast, the central bank added.

“Risks of?a?substantial global economic slowdown persist,” the central bank said. “Disinflationary risks exceed pro-inflationary risks over the short-term horizon.”

Citing these circumstances, the bank lowered the annual inflation forecast for this year to 3.2-3.7 percent from 4-4.5 percent. The bank expects inflation of 3.5-4 percent next year and around 4 percent thereafter.

The GDP growth forecast for this year was left unchanged at 0.8-1.3 percent. However, current data suggest that growth of the Russian economy might accelerate in the third quarter. The bank forecast 2-3 percent growth in 2022. “If?the situation develops in?line with the baseline forecast, the Bank of?Russia will consider the necessity of?further key rate reduction at?one of?the upcoming Board of?Directors’ meetings,” the bank said.

The material has been provided by InstaForex Company – www.instaforex.com