Russia slashes interest rate for fourth time this year

Keeping Russian gas transit through Ukraine ‘top priority’: EU

MOSCOW, Sept 16, (AFP): Russia’s central bank on Friday cut its key interest rate to 8.5 percent, the fourth reductions this year as inflation hits a record low.

The bank said it took the decision to slice 50 points off the rate after “inflation expectations resumed their decline”.

In a statement, the Russian bank said it would “continue to conduct a moderately tight monetary policy” in order to maintain inflation close to 4%.

But it also said that “during the next two quarters, the Bank of Russia deems it possible to cut the key rate further.”

The central bank is still struggling to breathe life into the Russian economy as it slowly emerges from the longest recession of President Vladimir Putin’s rule on the bank of low oil prices and Western sanctions over Ukraine.

The bank dramatically increased its interest rates following the crash of the ruble in late 2014 and has been gradually chipping away at the key rate since then in bid to bolster the economy.

After three consecutive cuts, the bank chose to not to lower them further during its last meeting in July due to a worries over inflation.

But those fears proved unfounded and inflation in August fell to a postSoviet low of 3.3 percent.

That is far from the 15 percent seen in the months following the height of the monetary crisis at the end of 2014, but the bank warned it continues to see “medium term risks of inflation overshooting 4%”.

Russia’s economy is expected to grow by between 1.7 percent and 2.2 percent according to central bank estimates after two years of recession.

The bank has however warned that Russia’s economy requires serious structural reforms to grow more strongly in the future.

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KIEV: The EU said on Friday that it was a “top priority” for the bloc to see Russia continue sending gas through Ukraine in the future despite a conflict between the two exSoviet countries.

The 28-nation bloc relies on Moscow for about a third of its gas supplies, with half of that amount transiting through Ukraine.

Kiev and Moscow have signed a deal under which Russia is obliged to supply its fuel to Europe via Ukraine’s gas transportation system until 2019.

“I have to underline that continuation of the important gas transit through Ukraine in (the) post-2019 period is a top priority for the European Union,” Maros Sefcovic, European Commission vice president for energy, said during a visit to Kiev.

Ties between Moscow and Kiev were shredded when Russia annexed the Ukrainian peninsula of Crimea and supported a pro-Kremlin insurgency in the east of the country following a pro-Western uprising in Kiev in 2014.

After numerous gas disputes with Kiev in recent years, Russia is now seeking to reduce transit of supplies via Ukraine or even totally halt them after the current contract expires.

For Kiev, the transit of Russian gas is an important source of revenue and the Ukrainian authorities are trying to oppose the gas pipeline projects launched by Moscow to diversify delivery routes.

While its Nord Stream route under the to has been put into operation, the planned Nord Stream 2 pipeline struggles to materialise, being hampered by geopolitical tensions.

While Russia insists the project is economically viable and aimed at boosting gas delivery capacity, Ukraine and its Eastern European allies try to prevent the construction of the Nord Stream 2 pipeline.