Central Bank of Russia cuts key interest rate by 25 bps, further pace of cuts to remain very gradual

The Central Bank of Russia lowered its key interest rate today by 25 basis points to 8.25 percent, as widely expected, hinting that there is room for additional monetary easing in the future meetings. The central bank highlighted that the current low inflation is mainly because of temporary factors that will soon begin to evaporate. Meanwhile, medium term inflation risks are skewed to the upside. Still high inflation expectations that remain unanchored are mentioned as another reason for a very slow easing, noted Nordea Bank in a research report.

The Russian central bank stated for the first time that it is shifting from a moderately tight to a neutral monetary policy mode as the key rate is slowly approaching the targeted equilibrium level of 6.5 to 7 percent.

“We expect the pace of cuts to remain very gradual as the task of anchoring inflation is far more difficult than bringing it down”, stated Nordea Bank.

The central bank has stated in the press release that the current monetary stance is not restricting the economic growth.

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