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Russia's central bank cut interest rates by 150 basis points on Friday, to 9.5 %, the levels before the invasion of Ukraine.
Following a significant reduction during a special meeting two weeks earlier, policymakers reduced the benchmark again on Friday from 11 %, Bloomberg reported.
A majority of 23 analysts polled by Bloomberg projected a lesser fall of 100 basis points.
The external environment for the Russian economy remains difficult and constrains economic activity severely. Simultaneously, inflation is dropping faster, and the decline in economic activity is lower than the Bank of Russia predicted in April, the bank said.
“Recent data suggest that price growth rates in May and early June have been low,” said CBR, in a statement. “This comes as a result of ruble exchange rate movements and the tailing-off of the surge in consumer demand in the context of a marked decline in inflation expectations of households and businesses.”
Given the present monetary policy stance, annual inflation will be 14.0–17.0 % in 2022, 5.0–7.0 % in 2023, and 4 % in 2024, according to the Bank of Russia's prediction.
It is the fourth rate drop since a late-February emergency boost from 9.5 % to 20 % in response to Russia's invasion of Ukraine. At a special meeting in late May, it was trimmed from 14 % to 11 %.
Current inflation is significantly lower than the Bank of Russia's April projection. Annual inflation was 17.0 % as of June 3rd (vs 17.8 % in April). According to the most recent statistics, consumer price growth rates were modest in May and early June.
Picture Credits: Reuters
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