Russia cuts key rate 50 bps to 8˝%; further cuts eyed over six months

By Wendy Van Sickle

Columbus, Ohio, Sept. 15 – The Bank of Russia’s board of directors decided to cut its key interest rate by 50 basis points to 8˝% on Friday, saying it will continue to keep a moderately tight monetary policy to hold inflation near the 4% target.

The board said in a notice that inflation is close to that target while the economy keeps growing. Amid favorable price dynamics of a number of goods and services, inflation expectations resumed their decline, but have not yet anchored at a low level.

In August, inflation totaled 3.3% following a brief rise to 4.4% in June. Inflation continues to decline in the non-food goods market, and services price growth has stabilized around 4%, the board said.

Medium-term risks of inflation overshooting 4% top the risk of its steady downward deviation from the target, the board said.

During the next two quarters, the bank expects it might further cut the key rate, according to Friday’s notice.

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