Russia lowers key rate as inflation drops

The Bank of Russia (CBR) has lowered its benchmark interest rate from 8% to 7.5% amid an expected slowdown in annual inflation, the central bank announced following a monetary policy meeting on Friday.

“Current consumer price growth rates remain low, contributing to a further slowdown in annual inflation… Q2 GDP and high-frequency indicators point to stronger dynamics of business activity than the Bank of Russia expected in July… Monetary conditions continued to ease, and the Bank of Russia views them as overall neutral,” the regulator said in the statement accompanying the decision.

It noted, however, that “the external environment for the Russian economy remains challenging,” but stated that “a growing number of enterprises are adjusting to the new environment.”

The CBR also revised its inflation forecast lower, with annual price growth now expected to come in at around 11-13% in 2022, 5-7% in 2023, before returning to the 4% target in 2024.

Analysts expect the CBR to continue cautiously easing monetary policy at the final two scheduled meetings this year, in October and December. The consensus is for the key rate to reach 6.5% by the end of the year.

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