The headquarters of Russia’s central bank in Moscow, Russia, on Monday, February 28, 2022.
Bloomberg | Bloomberg | beautiful pictures
Russia’s central bank on Friday cut its key interest rate by 150 basis points larger than expected, as the country’s handling of a strong currency dampened inflation and a possible recession.
This move brings the key rate to 8% from 9.5%; According to a Reuters poll.
“The external environment for the Russian economy remains challenging and continues to significantly limit economic activity,” the bank said in a statement, noting that the slowdown in economic activity Sales were slower than expected in June.
This is the fifth rate cut due to Central Bank of Russia so far this year after increasing the emergency from 9.5% to 20% at the end of February, following Moscow’s invasion of Ukraine.
In June, it scale down 150 basis points to 9.5% – the level at the time the invasion began.
In a statement on Friday, the CBR said the continued slowdown in inflation was due both to “the influence of a range of unique factors and low consumer demand.”
Annual inflation slowed to 15.9% in June from 17.1% in May and was last estimated at 15.5% on July 15.
The bank said future decision-making on key rates will be led by inflationary dynamics against target and an “economic transition”, as it seeks to overhaul the economy to accommodate severe, long-term economic sanctions from Western powers.
The CBR said it will consider the need for further significant rate cuts in the second half of 2022 and sees inflation fall to between 12% and 15% this year, before falling to 5%-7% by 2023 and back to the 4% Target by 2024.
Liam Peach, senior emerging markets economist at Capital Economics, said: “The central bank clearly doesn’t feel the need to slow the pace of rate cuts as inflation risks ease and impact on economic activity.
“That said, we think the next cuts will be more gradual. Russia’s inflation-adjusted policy rate over the past 12 months is currently below 3%, which is the average for 2016.” -19″.
Peach suggests that major rate changes are now in the rearview mirror, and that a cut of 100 basis points or less is more likely to happen in the future.
He added: “Overall, we expect policy rates to end this year at 7.00% (previously 7.50%) and in 2023 at 5.50%, lower than expectations of most people”.
