Russian Central bank cuts key rate to 17%

Russian Central bank cuts key rate to 17%

 The Bank of Russia has reduced the key rate from 20% to 17% per annum and held open the prospect for its further reduction at upcoming meetings, the regulator said in a statement on Friday.

"The Bank of Russia Board of Directors decided to cut the key rate by 300 basis points to 17.00% per annum from 11 April 2022," the statement said.

In its further key rate decisions, the Central Bank will take into account risks posed by external and domestic conditions and the reaction of financial markets, as well as actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon. It also holds open the prospect of further key rate reduction at its upcoming meetings, the regulator noted.

External conditions remain challenging for the Russian economy, considerably constraining economic activity, the Bank of Russia said. That said, financial stability risks are still present, but have ceased to increase for the time being, particularly due to the adopted capital control measures, according to the statement.

"There is a steady inflow of funds to fixed-term deposits. Annual inflation will continue to rise due to the base effect, though the latest weekly data point to a noticeable slowdown in the current price growth rates, including owing to the ruble’s exchange rate dynamics. The tightening of monetary conditions already in place is partly offset by the lending support programs launched by the Government and the Bank of Russia, but it will continue to limit pro-inflationary risks," the Central Bank noted.

The regulator’s board of directors will hold its next rate review meeting on April 29, 2022.

Earlier, the Central Bank made a decision on its planned board meeting on March 18 to keep the key rate at 20% per annum following its sharp unplanned increase on February 28 from 9.5% amid a drastic change in external conditions.