Bank of Russia lowers key rate to 7,5%

The Bank of Russia decided to lower the key rate by 0,5 basic points, to 7,5%, reads the regulator’s message.

“The current growth pace of consumer prices remains low encouraging further slowdown in annual inflation. This is related both as the impact of a set of one-time factors and moderate consumer demand. The business activity dynamics is better than expected in July. However, external conditions remain tough for the Russian economy and still significantly impede economic activity. The population’s inflation expectations and enterprises’ price expectations are still high,” says the message.

It is noted that the Bank of Russia will make further decisions on the key rate considering the real and expected inflation dynamics compared to the goal, the process of structural readjustment of the economy and evaluating the risks of internal and external conditions and financial markets’ reaction to them.

According to the Bank’s forecast, annual inflation will be 11,0-13,0% in 2022, while given the monetary policy that is pursued, it will reduce to 5,0-7,0% in 2023 and return to 4% in 2024.

In July, the Bank of Russia lowered the key rate to 8% a year. It decreased by 1,5 bp at once.

On 10 June, the Bank of Russia cut the key rate by 1,5% — from 11% to 9,5%. This was the rate before the start of Russia’s special operation in Ukraine.

On 28 February, the Board of Directors of the Bank of Russia decided to raise the key rate from 9,5% to 20% a year.

“The external conditions dramatically changed for the Russian economy. The rise in the key rate will allow providing a surge in deposit rates to the levels that are needed to compensate for devaluation and inflation risks. This will allow maintaining the financial and price stability and protect citizens’ savings from devaluation,” the Central Bank explained its decision.

Maxim Kokunin

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