Russian central bank cuts key rate by 200 bps as inflation subsides
The decision was in line with a Reuters poll of 27 economists. The cut is intended to revive lending and boost economic growth, which is expected to slow down sharply this year.
"Current inflationary pressures, including underlying ones, are declining faster than previously forecast. Domestic demand growth is slowing. The economy continues to return to a balanced growth path," the central bank said in a statement.
Russia's consumer price index fell by 0.05% in the latest week, marking weekly deflation for the first time since September 2024, which set the stage for the central bank's decision, although the regulator says it is looking at longer-term trends.
The central bank maintained its gross domestic product growth forecast at between 1% and 2%. The economy grew by 4.3% in 2024.
The decrease brought overall price growth this year to 4.56%, compared with 5.06% for the same period last year. Annualized inflation slowed to 9.17% from its peak of 10.3% in March.
The regulator was under intense pressure from the business community to start easing after it hiked the key rate to the highest level since early 2000s last year. Business leaders complained that at such a rate, investment no longer made sense.
Despite this pressure, President Vladimir Putin backed the central bank's policy, but warned it not to overcool the economy.
The rouble, which rallied by 45% against the U.S. dollar earlier this year in part due to the high key rate, has begun to weaken ahead of the expected rate cut and touched the 80 mark against the dollar on Friday.
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