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Financial News: Russia CB Cuts Key Interest Rate By 50

Russia CB Cuts Key Interest Rate By 50 Bps

04/28/2017 - 07:22:00 (RTTNews)

(RTTNews) - Russia's central bank slashed its key interest rate by a larger-than-expected 50 basis points on Friday, citing the economic recovery, and maintained that there was room for more reduction before the end of the year.

The Board of Directors decided to reduce the key rate to 9.25 percent per annum, the Bank of Russia said in a statement. Economists had expected a modest reduction to 9.5 percent.

Policymakers noted that inflation is moving towards the target, inflation expectations are still declining and economic activity is recovering. Meanwhile, inflation risks remain in place, the bank said.

"Given the moderately tight monetary policy, the 4 percent inflation target will be achieved before the end of the year and will be maintained close to this level in 2018-2019," the bank added.

"The assessment of the overall potential of the key rate reduction before the end of 2017 is unchanged," the bank said.

The central bank expects inflation to remain on the path of downward movement towards the 4 percent target before the end of the year.

The sharp decline in inflation witnessed in the first quarter is likely to grind to a halt temporarily as food inflation is expected to post a seasonal increase, the bank said.

Domestic demand continues to exert a disinflationary effect and there are signs of nascent recovery in consumer activity, the bank pointed out. Consumer lending bears no inflation risks, it added.

The bank assessed that the economy continued to recover in the first quarter and expects fixed capital investments to increase.

Citing the current recovery dynamics and the economy's growing resilience to the fluctuations in the external economic climate, the Bank of Russia said GDP is likely to grow in 2017-2019 even if the conservative oil price scenario materializes.

The next policy session is scheduled for June 16.

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