Bank of Russia slashes key rate for third time this year

The Central Bank of Russia has cut the interest rate for the third consecutive time this year to seven percent, marking another step towards decelerating inflation.

The benchmark rate was cut by 25 basis points to seven percent, its lowest point since 2014, according to a statement published by the regulator on Friday. It also promised more monetary easing to come as inflation dropped closer to the bank’s four percent target, although it’s been decelerating faster than expected this year due to an early harvest and weak consumer demand.

The central bank also cut its year-end inflation outlook to 4-4.5 percent from a June forecast of 4.2-4.7 percent, while Russia’s Ministry of economic development and trade has put it even lower – at 3.6-3.8 percent.

“Inflation slowdown is continuing. At the same time, inflation expectations remain elevated. The Russian economy’s growth rate is still coming in lower than the Bank of Russia’s expectations. Risks of a global economic slowdown have increased,” the regulator stated, noting that the risk of inflation either accelerating or slowing down by the year-end are balanced. The bank’s next board meeting on the key rate is scheduled for October 25, with another rate-cut anticipated.

“It’s probable that we will lower the rate [further] at one of the upcoming meetings, meaning one of the next three,” the head of the Central Bank of Russia Elvira Nabiullina said at a press conference in Moscow.Yury Tulinov, head of research at Rosbank, also pointed to the suppositions of a further rate-cut.

“If there are no shocks to the currency from US-China, sanctions and Brexit before the end of the year, they are ready to cut again,” he stated.

Following news of the rate cut, the ruble slightly strengthened against both major currencies. The dollar dropped by 0.11 percent to 65.91 rubles, and the euro lost 0.07 percent and now stands at 72.68 rubles.

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