Friday, June 10 2022

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

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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.

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“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.

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Reuters reporting

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