Russia CB Cuts Key Rate to 9%

Russia’s central bank on Friday decreased its key interest rate to 9% from 9.25% 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% 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, AFP reported.

Annual inflation in May stood at 4.1%, inching down over the past months toward the Russian government’s target of 4%. 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 grew 0.5% 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% 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 2018-2019.

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.

 Putin Confident

The recession in the Russian economy is over and the record-low inflation will fall further to 4% this year, President Vladimir Putin said on Thursday during his annual televised news conference.

Answering a question on whether the economic crisis in Russia is over, Putin said that objective data show the country has overcome it. “We have moved to a period of growth,” Putin said, adding that “we’ve witnessed growth for three consecutive quarters.”

According to the Russian president, industrial production and the volume of non-energy exports is also on the rise.

“The economy grew 0.7% in four months [January to April 2017], while investment into fixed capital grew 2.3%… it means the basis has been laid for growth in the near future,” said Putin.