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22 Jul, 2022 13:48

Russia slashes key interest rate

The Central Bank cited a further inflation slowdown in making the move
Russia slashes key interest rate

The Central Bank of Russia (CBR) cut its key interest rate on Friday from 9.5% to 8.0%, citing a further slowdown in annual inflation and subdued consumer demand. The cut was bigger than predicted by any of the Bloomberg-surveyed economists.

According to the bank’s statement, the decline in business activity has proven slower than had been expected in June. 

However, the external environment for the Russian economy remains challenging and continues to significantly constrain economic activity,” CBR said. 

It also indicated that further rate reductions may follow in the second half of the year. 

The CBR more than doubled rates in February, from 9.5% to 20%, after Russia was hit with an avalanche of sanctions from the US, EU, UK and other countries. The emergency hike was intended to prop up the ruble, which had fallen to record lows. The Russian currency has since recovered to multi-year highs. 

Since then, the rate has been cut several times, most recently on June 10, when the CBR slashed it from 11% back to where it had been in February at 9.5%. 

The regulator also said that it expects annual inflation to edge down to 12-15% this year, before dropping to between 5% and 7% in 2023 and returning to its 4% target in 2024.