Russian central bank cuts key rate to 9%

MOSCOW: Russia’s central bank on Friday decreased its key interest rate to 9 percent from 9.25 percent in line with its policy to gently invigorate the country’s economy.

“The Bank of Russia Board of Directors decided to cut the key rate to 9 percent per annum,” the bank said in a statement. The cut follows a half-point decrease in late April.

The board “notes that inflation is close to the target, inflation expectations keep declining, and economic activity is recovering,” the bank said, adding that it will continue “moderately tough” monetary policy to keep inflation in line.

Annual inflation in May stood at 4.1 percent, inching down over the past months toward the Russian government’s target of 4 percent. Though Russians are in “savings behavior patterns,” the bank observed “signs of nascent recovery in consumer activity.”

The bank added it considers mid-term inflation risks “elevated,” adding that it is likely to maintain a tight monetary policy “for a long time to anchor inflation close to its target.”

Russia’s gross domestic product (GDP) grew 0.5 percent in the first quarter of 2017, its statistics agency said last month, slowly recovering from a crippling economic crisis in the wake of the crash of oil prices and international sanctions in 2014, which diminished people’s purchasing power.

The government expects growth to reach 2 percent this year.

Meanwhile, Elvira Nabiullina, the banks’ governor, said that the central bank was keeping its oil price forecast at $50 per barrel this year and believed it would go down to $40 per barrel in 20182019.

The task of Russia’s central bank is to make sure that inflation expectations keep falling in the economy, she said.

Nabiullina also said new inflation risks have appeared recently, and that external economic conditions were likely to remain unstable.