The Russian central bank lowers its key rate to 14% and announces further cuts

People walk past the Central Bank headquarters in Moscow, Russia February 11, 2019. REUTERS/Maxim Shemetov/File Photo

April 29 (Reuters) – Russia’s central bank cut its key rate to 14% on Friday in a sharper-than-expected measure and said it saw room for further rate cuts this year as it tries to managing a shrinking economy and soaring inflation.

The central bank rallied after unexpectedly lowering the key rate to 17% earlier in April following an emergency rate hike to 20% days after Russia sent tens of thousands of soldiers in Ukraine on February 24.

Friday’s rate cut beat expectations for a 200 basis point move in a Reuters poll earlier this week. Analysts have predicted that Russia will need lower rates in the face of an impending economic recession following the West’s imposition of unprecedented sanctions.

“If the situation develops in line with baseline forecasts, the Bank of Russia sees scope for a policy rate cut in 2022,” the central bank said in a statement.

A Reuters poll showed earlier on Friday that the central bank should cut its key rate to 10.5% by the end of the year, as the stronger ruble helps limit inflationary risks. Read more

“The dynamics of the ruble’s exchange rate will remain a significant factor shaping the path of inflation and inflation expectations,” the central bank said.

The central bank said consumer inflation was on track to accelerate to 18-23% in 2022, far exceeding the 4% target, which could be reached in 2024. It was 17.6% to April 22.

High inflation is lowering living standards and has been a top concern for Russians for years.

The central bank must now rein in inflation near 20-year highs, while steering the economy through its steepest contraction since the years following the fall of the Soviet Union in 1991. Read more

Russia’s export-dependent economy will contract by 8-10% this year, according to the central bank’s new set of forecasts.

Central Bank Governor Elvira Nabiullina will shed light on the bank’s forecasts and policy plans during a press conference at 12:00 GMT.

The next pricing meeting is scheduled for June 10.

Reuters reporting

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