The board of directors of the Russian Central Bank has decided to cut the key rate by 150 basis points to 8% per annum, thereby substantially exceeding market expectations.
"Current consumer price growth rates remain low, contributing to a further slowdown in annual inflation. This is due to both the influence of a set of one-off factors and the subdued consumer demand. Inflation expectations of households and businesses have significantly decreased, reaching the levels of spring 2021. The decline in business activity is slower than the Bank of Russia expected in June. However, the external environment for the Russian economy remains challenging and continues to constrain economic activity significantly," the regulator said in a press release following the meeting of the board of directors.
"Going forward, in its key rate decision-making, the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as risks posed by domestic and external conditions and the reaction of financial markets. The Bank of Russia will consider the necessity of key rate reduction in the second half of 2022," the CBR said in the press release.